Zip Co Share Price Uneasy on Record Revenue (ASX:Z1P)

Shares trading in buy now, pay later (BNPL) platform Zip Co Ltd [ASX:Z1P] have had a shaky day in trade after announcing record revenue.

Z1P has experienced steady growth in its share price since the market crash in March.

Capitalising on the boom in online commerce due to COVID-19 induced lockdowns.

ASX Z1P - Zip Share Price Chart

Source: Tradingview

Though the Zip Co share price took a bit of a beating this morning, shedding around 8%.

But those losses have now partially been reclaimed.

At time of writing shares in Z1P are down 2.28% or 18 cents to trade at $7.72 cents per share.

The US makes up for lacklustre Aussie performance

It may have been a record in quarterly revenue for Zip Co but it wasn’t enough to quell the concerns of investors.

For the quarter ending 30 September 2020 (Q1 FY21), revenue grew by 88% year-on-year (YoY) to a record AU$71.7 million.

A quarterly transaction volume of $943.1 million, up 96%.

According to Z1P, this annualises out to be ~$3.8 billion.

The number of Zip Co customers also showed impressive growth, totalling 4.5 million, up 114%.

Australian monthly arrears (a forward indicator of future losses) reduced from 1.33% in June to 0.91% in September.

Not bad given the current climate.

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So, what got investors down?

Well, it could be that Z1P’s Australian market growth is dragging its feet a little.

ANZ quarterly revenue grew just 3% quarter-on-quarter and 45% YoY.

While the US grew by 50% and 409% YoY.

Maybe that doesn’t seem so bad.

But compared to Q4 2020’s quarterly revenue growth of 5%, growth could be slowing.

Net bad debts also increased over the quarter to 2.43%, reflecting the difficult economic conditions.

What’s in store for the Zip share price?

The market has focused on the negatives in the quarterly update today.

However, I think the share price action might have been an overreaction given the recovery throughout the day.

The moderation in revenue growth within the ANZ market could be a little concerning.

But with Z1P’s recent foray into the US market producing pleasing results, there is still significant upside.

And with Z1P’s UK launch on track for this half, the company will further diversify its growth options.

In terms of share price, one brokerage firm, RBC Capital Markets, has high hopes.

RBC says that with the government stimulus roll-off just around the corner, BNPL players like Z1P have a distinct advantage with low account balances, dynamic credit-decisioning, and high receivable book turnover.

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Lachlann Tierney

For Money Morning

Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. Lachlann is involved in two publications:

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