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.
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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.
