Will Zip Co Ltd (ASX:ZIP) return to its stellar high of $14.53?
ZIP became the stock of choice for many investors after rising from just a few cents when it launched in 2013 to the high of $14.53 in February 2022.
But that all ended when the stock crashed heavily, falling more than 95% to a low of $0.43 on June 29.
Sadly, this not only wiped out the profits of many investors but also took the capital of those who were late to the bandwagon.
Was the rise of ZIP just a bubble?
ZIP’s vision is to be the next generation of payments helping consumers and business take control of their financial future.
In 2020, ZIP caught the eye of many investors after it rose more than 1,200% between March 2020 and February of this year. The more the stock rose, the more investors jumped on board hoping to grab a big chunk of the profits.
Having risen 65% since June to now be trading at $0.73, investors are eyeing off ZIP hoping it will repeat its stellar run although, in my opinion, they will be sadly disappointed.
Bubbles occur because of human greed taking prices way beyond their fundamental value. But as we all know bubbles burst and when they do there is blood on the streets and ZIP is no different.
Don’t get me wrong, ZIP is a good company and is doing well with its expansion plans but this takes money and time, which stifles profits, and it is in a growth area with lots of competition.
So, what is the outlook for ZIP?
While it has stopped falling right now, I am not confident it will rise in a sustained uptrend.
Rather, ZIP is likely to trade sideways between $0.50 and just over $1, which is a way for good traders to make some nice cash flow in the short term.
For those investors looking for medium- to long-term growth, you may be waiting quite a while.
- Dale Gillham