Zip share price has had a difficult year as concerns about a bubble in the fintech sector. Shares of the Buy Now Pay Later (BNPL) company were trading at $0.770 on Friday, down by over 97% from its all-time high. Its market cap has plunged to about A$540 million.
BNPL troubles hits Zip
Zip Limited is a leading Australian fintech company that competes with the likes of AfterPay and Zim Pay among others. The firm makes it possible for people to buy products and pay for them in equal installments. It also owns companies like Twisto Payments, Pocketbook, and QuadPay among others.
The BNPL industry has been in a difficult place after it experienced a decade of growth. In Europe, Klarna, which was once valued at over $46 billion, raised funds at a valuation of below $7 billion. In the United States, Affirm stock price has collapsed by more than 90% in the past 12 months. Its market cap has plunged to about $3 billion.
Block, formerly known as Square, has seen its stock plunge by 71% in the same period. It is valued at about $39 billion. Block is a notable firm since it acquired AfterPay in a $27 billion deal in 2021.
Zip share price has collapsed because of worries about the firm’s slow growth. There are also concerns about the company’s source of financing as interest rates rise. Most importantly, investors are concerned about the industry’s soaring losses and systemic risks.
The most recent results showed that the company lost A$1.1 billion in the year that ended in June. That was a bigger loss than the A$678 million that it generated in the previous fiscal year. As a result, the firm will likely continue making significant losses in the coming months.
Therefore, with interest rates rising in Australia and other countries, Zip will likely struggle to raise capital at friendly interest rates.
Another concern is that Australia’s retail spending is slowing as inflation remains at an elevated level. The most recent data shows that the headline inflation jumped to the highest level in decades in the third quarter. Wages are also not rising as fast as well. As such, demand for Zip’s products will likely be limited.
Zip share price forecast
The four-hour chart shows that the Zip stock price ASX has done a slow recovery in the past few days. In this period, it has rallied above the 25-day and 50-day moving averages. The stock has also moved above the important resistance level at $0.725, which was the highest level on October 20th.
In the same period, the Relative Strength Index (RSI) has formed a bullish divergence pattern. It also seems like it is forming a bullish flag pattern. Therefore, there is a likelihood that the Zip share price ASX will continue rising as buyers target the key resistance level at $1.