Will 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 stellar high of $14.53 in February 2022. But that all ended when the stock crashed heavily falling over 95 per cent into a low of $0.43 on 29 June. Sadly, this not only wiped out the profits of many investors but it also took the capital of those who were late to the bandwagon.

Was the rise on 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 over 1,200 per cent 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 69 per cent 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.

What were the best and worst performing sectors last week?

The best performing sectors included Materials up 4.14 per cent followed by Information Technology up 2.23 per cent and Communication Services up 1.92 per cent. The worst performing sectors included Energy down 3.15 per cent followed by Consumer Discretionary down 1.09 per cent and Financials down 1 per cent.

The best performing stocks included Fisher & Paykel Healthcare up 19.52 per cent followed by Allkem up 9.26 per cent and Mineral Resources up 9.11 per cent. The worst performing stocks included Woodside Energy down 5.95 per cent followed by Bank of Queensland down 5.29 per cent and Orica down 5.11 per cent.

What's next for the Australian stock market? 

The All Ordinaries index is once again defying logic rising for the eighth consecutive week, which is quite uncommon and by last Thursday, it had risen 14.58 per cent since its last major low on 3 October. Regular readers will remember the All Ordinaries Index rose 12.23 per cent over eight weeks from 20 June to 16 August this year before falling over 10 per cent over the next seven weeks. So, will we see a repeat of this?

While the market will fall, I don’t believe it will last for seven weeks like it did previously. That said, given the run up has occurred over eight weeks and higher than expected, the fall may last longer than two weeks although not by much more. As I have previously, stated, there is strong support between 7,000 and 7,200 points, which is likely to stop the fall that will unfold very soon.

As I continue to say, now is not the time to be buying into lots of new positions, as there will be better opportunities in the not too distant future.  

Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the bestselling and award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online.