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Why the Zip Co share price is down 7% today

James Mickleboro
Payment Technology

One of the worst performers on the All Ordinaries index on Wednesday has been the Zip Co Ltd (ASX: Z1P) share price.

In afternoon trade the buy now pay later platform provider’s shares are down 7% to $3.18.

This latest decline means its shares have lost 19% of their value since announcing a capital raising at the end of November.

Though, it is worth noting that they are still up 200% since this time last year.

Why is the Zip Co share price sinking lower today?

Zip Co’s shares have come under pressure despite there being no news out of it (excluding the capital raising) since its Amazon agreement in mid-November.

That announcement revealed that Zip has been made available as a payment option for customers shopping on the Amazon.com.au website. This made Zip Amazon’s first Australian instalment payment option and it remains the case today.

The Amazon deal was a great way to end a busy year which saw countless agreements being signed. Other notable retailers joining the Zip platform include the Woolworths Group Ltd (ASX: WOW) owned Big W brand, the Wesfarmers Ltd (ASX: WES) owned Kmart brand, and Chemist Warehouse.

The combination of these retailer additions and its impressive underlying sales growth, sent the Zip Co share price rocketing higher last year.

I suspect this means that profit taking is weighing on its shares at present. Especially given how in the next two to three weeks the company will be releasing its next quarterly update.

As this update contains the key Christmas trading period, it will have a major bearing on its full year results. Some investors may be a little nervous ahead of its release and are locking in some of their profits. The fact that Zip Co didn’t release a Black Friday update like rivals Afterpay Ltd (ASX: APT), Sezzle Inc (ASX: SZL) and Splitit Ltd (ASX: SPT), no doubt adds to the nerves.

However, given the growing popularity of the payment method and its international expansion, I feel quietly confident that Zip Co will have had a strong first half. This could make the recent pullback in its share price a buying opportunity.

The post Why the Zip Co share price is down 7% today appeared first on Motley Fool Australia.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020