The Zip Co Ltd (ASX: Z1P) share price plunged more than 7% today, erasing the gains made since the start of this week.
However, even since this time last week the Zip Co share price is still up by 25%, so today's decline is likely the work of profit takers. There aren't many shares out there that can generate a return of 25% in one week.
The excitement surrounding the buy now, pay later industry is perhaps getting out of control. Afterpay Touch Group Ltd (ASX: APT) has rightly received a lot of praise – it has captured a significant portion of the online fashion market and is expanding into different geographies and different industries, such as dentistry and travel.
However, Splitit Ltd (ASX: SPT) is up 42% in just the past two months, when it doesn't have the same global brand as Afterpay does.
Zip Co, whilst not quite as widespread as Afterpay, has also been very successful in recent times. The FY19 half-year revenue was up 114% to $34.2 million, the number of consumers doubled to 1 million and net bad debts declined as percentage by 0.8% from 2.61% to 1.81%.
Some of its biggest customers include Chemist Warehouse, Appliances Online, Wesfarmers Ltd (ASX: WES) businesses Bunnings Warehouse, Officeworks and Target, Super Retail Group Ltd (ASX: SUL), Spotlight and many others.
Zip Co is one to watch, but today's price drop shows that sometimes it can be momentum investors are driving up the share price over the short-term. Time will tell if today's share price is a fair price for Zip Co.
