The current market conditions are deeply bearish, especially for growth sectors like BNPL, with ominous signals suggesting further declines ahead. Strong US economic data, including rising services activity and job openings, indicates inflation is returning to troubling levels, setting the stage for even more aggressive rate hikes by the Federal Reserve. With the 10-year Treasury yield hitting 4.7%, its highest in eight months, the cost of borrowing is poised to soar even further, tightening liquidity and increasing the pressure on equities, particularly risk-heavy growth stocks like ZIP.
For companies like ZIP, the situation is even more dire. Rising interest rates will cripple already fragile margins, making it more expensive to borrow and fund operations. Consumers are increasingly squeezed, heightening the risk of widespread defaults on BNPL loans, which would devastate ZIP’s already struggling revenue streams. The surge in bond yields also directly impacts growth stocks, as the present value of future earnings continues to shrink, leaving ZIP’s share price vulnerable to severe losses.
When the 10-year yield was last at these levels in April 2024, ZIP’s share price languished in the mid-to-low $1 range, and there’s little hope of a recovery this time. With inflation on the rise again and the Fed likely to continue its hawkish stance, the macroeconomic landscape for ZIP and other BNPL companies is increasingly grim. The risks of continued declines in ZIP’s share price are virtually certain, as the company faces mounting headwinds from both tightening financial conditions and consumer defaults. This is a toxic environment for ZIP, and its future prospects are looking ever bleaker.
ZIP Price at posting:
$3.28 Sentiment: Sell Disclosure: Not Held
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