Background: Zip Co was founded in Sydney in 2013 and emerged as one of Australia’s early Buy Now Pay Later success stories. It competed aggressively with Afterpay during the BNPL boom, and at its pandemic peak reached a market value of more than $10 billion.Today, its valuation sits closer to $1.5 billion.

What happened: Zip reported solid year-on-year growth, but the market focused on the shortfall versus forecasts. Total Transaction Value increased 34%, cash EBITDA rose more than 85%, and revenue improved — yet these metrics came in slightly below analyst expectations.

What else: At the same time, net bad debts lifted to 1.7% of TTV, which raised some serious concerns about credit quality. Next minute: investors sent the share price down more than 33% in one session. The result highlights how sensitive investors are to guidance during reporting season.

What's the key learning?

💡In the sharemarket, it’s not just about whether a company grows… it’s about whether it grows as much as people were expecting. Before results are released, analysts publish forecasts for revenue, profit and margins. The share price typically reflects those expectations in advance.

💡The bigger the gap between expectation and reality, the bigger the reaction. If performance falls short of consensus, even slightly, it is treated as a miss. And m ultiple small disappointments can compound into a major sell-off.

💡This reporting season has already delivered  some pretty sharp reactions. Temple & Webster saw its share price fall around 30% in a single session after its underwhelming results. So when sentiment in the market is cautious, even small misses can lead to outsized sell-offs.