The Zip (ASX:Z1P) share price has taken a turn for worse in May. Could it be driven by a sell-off in both the BNPL and tech sector?
The post Why is the Zip (ASX:Z1P) share price down 11% so far this month? appeared first on The Motley Fool Australia. –
The Zip Co Ltd (ASX: Z1P) share price has taken a turn for worse, down 11% in May to a 5-month low of $6.91.
Zip shares have gone from a peak 150% year-to-date return after surging to a record high of $14.00 on 16 February, to a return of just 23.5% today.
What’s driving the Zip share price lower?
Tech is not so hot right now
Factors such as market sentiment and sector performance are key drivers of the Zip share price. However, these are entirely out of its control.
The S&P/ASX200 Info Tech (INDEXASX: XIJ) index has taken a turn for worse, down almost 10% in the last 5 trading sessions. The index is now down 16% year-to-date, signalling the weakness in Aussie tech.
This would be understandable if the broader market was struggling, however, the S&P/ASX 200 Index (ASX: XJO) is up some 6% year-to-date.
While investors might argue the growth opportunity at hand, such as Zip’s solid Quadpay performance and international expansion plans, its shares are swimming against the tide as tech falls out of favour.
A similar rotation effect took place late last year, where the Zip share price tumbled from highs of $10.50 to the $5 level between August 2020 and January 2021.
Heavy selling for BNPL shares
While the Zip share price has been able to stay in positive territory for the year, the same can’t be said about its peers.
Many smaller BNPL shares with a market capitalisation of less than $1 billion and a lack of international exposure have slumped between 10% to 60% in the past few months.
The Splitit Payments Ltd (ASX: SPT) share price has almost halved from $1.30 to 69.5 cents this year.
While the likes of Laybuy Group Holdings Ltd (ASX: LBY) never took off after listing on the ASX on 7 September 2020. Laybuy shares went as high as $2.30 on its ASX debut but currently trade at just 68 cents.
It’s possible that the recent weakness in the Zip share price is a reflection of the tech sector’s underperformance and broader market volatility.
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
- ASX 200 down 1%: CBA Q3 update, tech shares rise, Qantas update
- ASX 200 sinks, Boral rises, A2 Milk drops again
- Flight Centre and Zip were among the most traded ASX shares last week
- Afterpay (ASX:APT) share price dives 7% despite US-listed rival surging on results
- How will the Afterpay (ASX:APT) share price react when US rival delivers trading results overnight?
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 owns shares of AFTERPAY T FPO. 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.