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Date : 22/07/2021

Zip Co Shares down on ASX Following Q4 Updates

Headquartered in Sydney, Zip Co. is one of the largest BNPL players in Australia. Zip has operations across Australia, New Zealand, South Africa, the United Kingdom, and the USA. With Zip’s acquisition of QuadPay, the firm has entered the highly lucrative North American market.

Late last month, Zip also announced their expansion into Europe and the Middle East. by acquiring the remaining shares on top of their existing holdings in European BNPL provider Twisto Payments and of UAE-based BNPL leader Spotii Holdings Ltd. The transactions align with Zip’s global expansion plans and the rapidly accelerating global BNPL opportunity. As demonstrated through the acquisition of QuadPay, where annual transactions have soared by over 200% post acquisition, Zip is building its playbook in successfully identifying, completing,and integrating strategic acquisitions.

Why is Zip Co Shared Price struggling on ASX today?

Zip announced their Q4 FY21 results this morning. The company reported stellar growth numbers across its BNPL operations in the United States (Quadpay), Australia and New Zealand (ANZ), and the United Kingdom (UK) once again, however, Z1P shares reacted negatively and the Z1P stock price finished in the red.

Among the highlights were:

  • Record group quarterly revenue of $129.9m (up 104% YoY).
  • Record monthly revenue in June, annualising at $537.2m.
  • Record quarterly transaction volume of $1.8b (up 116% YoY).
  • Record transaction numbers for the quarter of 14.2m (up 230% YoY).
  • Customer numbers increased to 7.3m (up 87% YoY).
  • Merchants on the platform increased to 51.3k (up 84% YoY).

Zip continued to execute on its global strategy, agreeing to acquire the remaining shares in both TwistoPayments (Europe) and Spotii Holdings Ltd (Middle East). The quarter also saw Zip launch organically into Canada and Mexico. Zip completed an extension and increase to the Goldman Sachs debt facility in the US, now US$300m(with the option to increase to US$400, supporting $5b+ in TTV), whilst also securing a material improvement to the facility’s weighted average cost of capital. The company also reported strong growth in app downloads continuing globally with over 1.5m downloads for Zip US (Quadpay) (now 5.8m in total) and 241k downloads for Zip ANZ (now 2.8m in total).

Institutional investors expected a lot more when it comes to customer growth expectations and this looks as to why the Z1P shares were sinking in today’s trading session. We think Zip’s result is fantastic and their entry into Canada and Mexico increases the growth potential. BNPL is not a high profit margin segment and therefore, the share price is mainly driven by the growth potential in customers and transactions. While Z1P posted a very strong quarterly result, the big investors look to have expected more. WIth the delta variant now affecting economies, the next few months may result in a slowdown in retail spending – directly impacting the BNPL sector and the likes of Z1P. As a result, we expect Z1P shares to continue to trade at high degrees of volatility. Z1P shares closed at $6.99 a share today – dipping 7.78%.

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