** Zip Co ZIP.AX falls as much as 2.1% to A$3.015, lowest since December 18

** UBS cuts PT by 4% to A$5.2; maintains "buy"

** Says last three months saw significant share price underperformance from buy-now-pay-later (BNPL) provider due to evolving U.S. regulatory landscape

** Adds U.S. state attorneys general's probe into BNPL firms weighing on stock

** Notes recent news on Donald Trump's call for 10% rate cap on annual percentage rate credit cards could be potentially positive for co, as reduced credit availability could drive consumers to BNPL

** However, flags if BNPL taxation fees are treated as "interest", Zip's effective "interest" rate on a transaction would be ~24%, above the 10% limit

** Sees rate caps unlikely to be implemented; still views fundamentals to remain strong

** ZIP rose 11.2% last year

(Reporting by Nikita Maria Jino in Bengaluru)

((Nikita.Jino@thomsonreuters.com;))