Zip shares have had an interesting month…
The post Here’s why the Zip (ASX:Z1P) share price has been volatile in August appeared first on The Motley Fool Australia. –
It has been an eventful month for the Zip Co Ltd (ASX: Z1P) share price.
At one stage, the buy now pay later (BNPL) provider’s shares were up as much as 20% month to date to $7.99.
However, ahead of the final day of the month, the Zip share price is up just 2.7% in August and in danger of slipping into the red.
What’s been going on in August for the Zip share price?
The Zip share price was rocketing higher earlier in the month after it was announced that rival Afterpay Ltd (ASX: APT) would be acquired by US payments giant Square.
Investors were buying Zip shares on the belief that it could be a takeover target as well.
Particularly given how there has been speculation recently that larger BNPL rival, Klarna, has been building up a strategic stake in the company. This has never been confirmed nor denied by Klarna.
What has been weighing on its shares?
Unfortunately, the Zip share price failed to hold onto these gains and has pulled back almost 15% over the last three weeks.
This appears to have been driven partly by the release of its full year results for FY 2021.
Zip reported a net loss after tax of $653 million for the year due largely to a number of one-off non-cash items. It also revealed a significant increase (6x) in its marketing spend in FY 2021 to drive growth. This appears to have spooked investors.
Is this a buying opportunity?
The team at Morgans appear to believe the weakness in the Zip share price could be a buying opportunity.
Following the release of its full year results last week, Morgans retained its add rating and lifted its price target to $8.87. Based on the current Zip share price of $6.82, this implies potential upside of 30% over the next 12 months.
Morgans commented: “We lower our Z1P FY22F EPS by ~12% on higher costs but lift our FY23F EPS >10% (off a low base) on the benefits of higher growth.”
“We continue to see longer term upside if Z1P can execute on its ambitions of becoming a global payments player and maintain our ADD recommendation,” it concluded.
Should you invest $1,000 in Zip right now?
Before you consider Zip, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Zip wasn’t one of them.
The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of August 16th 2021
Why Zip (ASX:Z1P) and this fantastic ASX growth share could be buys
Own Zip (ASX:Z1P) shares? Here’s what to look out for in FY22.
How does Afterpay (ASX:APT) earnings result compare to Zip?
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.