Down 67% in 2022, is the Zip (ASX:Z1P) share price a bargain?
$Zip(Z1P.AU$ share price has been one of the worst performers on the ASX in 2022. Is it so cheap that it’s now a bargain?
$Zip(Z1P.AU$ is one of the larger global buy now, pay later players.
This year alone has seen a huge decline for Zip shares. The last 12 months show a drop of more than 80% for the BNPL company.
This year alone has seen a huge decline for Zip shares. The last 12 months show a drop of more than 80% for the BNPL company.
It has been rough, but is the worst over?
$Zip(Z1P.AU$ is facing a number of headwinds.
For starters, investors seem to be turned off ASX growth shares . Rampant global inflation is leading to expectations that central banks are going to increase interest rates more than previously thought. The US Federal Reserve just started with a 0.25% increase and it’s expecting a few more increases over the rest of this year until the rate is between 1.75% to 2% by the end of 2022.
Higher interest rates are, theoretically, meant to lead to lower asset prices.
But for $Zip(Z1P.AU$ , higher interest rates could be particularly difficult because interest is one of its major expenses. It’s unlikely that Zip can charge merchants any more, so a higher interest rate is likely to lead to a lower profit margin than the BNPL business has seen recently. There could also be higher bad debts, which Zip is already seeing.
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