Insights

Could this be why the Zip (ASX:Z1P) share price lost all its gains today?

Could this be why the Zip Co Ltd (ASX: Z1P) share price is now 3% lower after trading as high as 6% up on Wednesday? Let’s take a look.
The post Could this be why the Zip (ASX:Z1P) share price lost all its gains today? appeared first on The Motley Fool Australia. –

falling asx share price represented by business man wearing box on his head with a sad, crying face on it

Today was meant to herald a sigh of relief for the Zip Co Ltd (ASX: Z1P) share price after a sharp 12% decline this week.

The Nasdaq Composite (NASDAQ: .IXIC) finished 3.69% higher overnight and United States buy now pay later (BNPL) giant, Affirm Holdings Inc (NASDAQ: AFRM) also rebounded 7.20% higher. 

Despite the Zip share price opening as much as 6% higher today, its shares are now down nearly 3% at the time of writing. This compares to the Afterpay Ltd (ASX: APT) share price which is still trading around 7% higher. A sell rating released by UBS today could be to blame. 

UBS downgrades Zip share price from neutral to sell 

UBS noted that Zip’s growth had surpassed Afterpay in the first half and remained positive about the company’s short-term growth potential. 

Despite the positives, the broker was concerned about Zip’s significant execution risks and mounting capital requirements.

The broker could be pointing to the fact that Zip had only launched in the United Kingdom in December 2020, some two years behind rival Afterpay. It could also be highlighting differences such as Afterpay’s pending regulatory approval to launch into Spain, France and Italy, compared to Zip’s two minority investments in BNPL players in Eastern Europe and the United Arab Emirates. 

Zip currently finances its growth in customer receivables via its asset-backed securitisation program. The company is likely to require additional external funding to support receivables growth. 

UBS highlighted that higher bond rates could also affect the cost of funding and the company’s valuation. In Zip’s half-year results, the company noted that the weighted average interest rate on loans outstanding at 31 December 2020 was 3.9% compared to 3.7% at 30 June 2020. Benchmark US bond yields were sitting at the 0.90% levels in December 2020 compared to the 0.70% levels in June 2020.

PayPal to launch BNPL in Australia 

In other news that could be dragging on the Zip share price, PayPal (NASDAQ: PYPL) has announced it will be bringing its successful ‘Pay in 4’ BNPL product to Australia in the coming months. This comes after its launch in the US late last year. 

Some other ASX-listed BNPL shares have also given back gains today including Sezzle Inc (ASX: SZL), Openpay Group Ltd (ASX: OPY) and Laybuy Holdings Ltd (ASX: LBY)

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia has recommended Sezzle Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Could this be why the Zip (ASX:Z1P) share price lost all its gains today? appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!