The Zip Co Ltd (ASX:Z1P) share price is under pressure on Friday and is tumbling lower. Here’s why its shares are ending the week in the red.
The post Here’s why the Zip (ASX:Z1P) share price is now down 44% from its high appeared first on The Motley Fool Australia. –
The Zip Co Ltd (ASX: Z1P) share price has come under pressure on Friday morning.
At the time of writing, the buy now pay later provider’s shares are down 4% to $8.11.
This means the Zip share price is now down 44% from the 52-week high of $14.53 it reached in February.
Why is the Zip share price sinking today?
Investors have been selling Zip and other ASX tech shares today after a very disappointing night of trade on Wall Street’s tech-focused Nasdaq index.
According to CNBC, the Nasdaq tumbled 3% lower overnight after bond yields surged higher.
Apple, Amazon, and Netflix shares all fell more than 3%, while Tesla crashed almost 7% after the US 10-year Treasury yield jumped 11 basis points to a 14-month high of 1.75%.
In addition to this, the 30-year Treasury yield climbed 6 basis points to hit the 2.5% level for the first time since August 2019.
Why is this bad news for Zip?
There are a couple of reasons why this is bad news for the company and is weighing on the Zip share price.
The first is that rising bond yields impact valuations, particularly those that trade on lofty multiples like Zip and Afterpay Limited (ASX: APT). This is because as the risk-free rate increase, investors become less willing to pay over the odds for equities.
Another reason why rising bond yields could be bad news for Zip is the potential impact to the cost of its funding, which could weigh on margins.
It is partly for this reason that last week UBS downgraded Zip’s shares to a sell rating with a $6.40 price target.
Though, it is worth noting that not everyone is as bearish. Last month Morgans put an add rating and $12.10 price target on the company’s shares.
Time will tell which broker made the right call.
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.
*Returns as of February 15th 2021
- Revealed: 4 least profitable industries in Australia
- Is the new CBA BNPL service bad news for Afterpay and Zip shares?
- Is the Zip (ASX:Z1P) share price a buy now or buy later?
- ASX 200 dips, CBA launches BNPL, Fonterra reports
- How much have investors made (or lost) on Zip (ASX:Z1P) shares?
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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.