The Zip Co Ltd (ASX: Z1P) share price has been spiralling downwards to post a loss of 15% in December. This comes despite the buy-now pay-later (BNPL) company providing a positive trading update for the month prior (November).
At yesterday's market close, Zip shares finished the day flat at $4.39.
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What's going on with Zip?
Early this month, Zip provided investors with its monthly performance review, highlighting strong numbers for November.
While the company's key metrics surged by double digits year-on-year, its shares accelerated by 20% over the two days. However, this was short-lived with the Zip share price quickly retracing during the following five business days (9 – 15 November).
A catalyst for the recent dip as described by management in the trading update could be the significant volatility in equity markets. The S&P/ASX All Technology Index (ASX: XTX), has fallen around 4% over the course of December.
In addition, the BNPL competition is continuing to ramp up as more entrants come into the industry.
In September, PayPal Holdings Inc (NASDAQ: PYPL) acquired Japanese BNPL company, Paidy to fuel its own growth.
Unfortunately for Zip, a rush of new direct players aiming to win global market share is becoming of concern.
National Australia Bank Ltd. (ASX: NAB) and Commonwealth Bank of Australia (ASX: CBA) have also entered the BNPL space. And if that's not enough, Suncorp Group Ltd (ASX: SUN) partnered with Visa Inc (NYSE: V) for a new BNPL solution.
This is on top of the direct competition that Zip is up against which includes Afterpay Ltd (ASX: APT) and Sezzle Inc (ASX: SZL).
Furthermore, a couple of brokers reassessed the 12-month price target for Zip shares. As such, Swiss investment firm, UBS cut its rating by 5.5% to $5.20 apiece. American multinational investment bank, Jefferies had a more bearish outlook. Its analysts slashed its view on Zip shares by a massive 40% to $4.48.
It seems that investors have a similar tone on Jefferies' prediction, with Zip shares currently trading on par.
Zip share price summary
It has been a whirlwind year for Zip investors. The company's shares rocketed to an all-time high of $14.53 in February, before quickly plummeting throughout the year.
Zip commands a market capitalisation of around $2.57 billion and has more than 588.83 million shares on its registry.
