What’s Keeping the Zip Co Share Price Down? (ASX:Z1P)

It’s been a good year to own ASX-listed tech stocks, which have seen meteoric rises during Australia’s lockdowns.

The share price of buy now, pay later (BNPL) company Zip Co Ltd [ASX:Z1P] experienced a solid run from April through to June.

However, barring a few quick price swings, Zip’s shares have met heavy resistance around the $6 mark.

ASX Z1P Share Price Chart - Zip Co

Source: Tradingview

It seems that any enthusiasm injected into the Zip share price just as quickly evaporates.

Shares peaked at $6.25 in the first 20 minutes of trading this morning, spurred on by positive sentiments presented in the company’s annual general meeting.

However, those gains were quickly wiped out, with shares currently trading at $6.05, down 0.17% from yesterday’s close.

What growth do investors need?

In his address to shareholders, Zip Chairman Philip Crutchfield highlighted the founders’ mantra: that growth at all costs would not be pursued.

The company believes credit should be provided responsibly, and only after proper due diligence on those wanting access to its services.

That doesn’t mean the company didn’t experience solid growth last financial year, just look at the figures below.

ASX Z1P Performance Numbers

Source: Zip Co.

But with ASIC now scrutinising the BNPL services providers, particularly those who rely on late fees to generate revenue, companies like Zip need to tread carefully.

Three Innovative Fintech Stocks to Watch Now. Discover more.

According to Zip, its users have a higher average credit score than the ‘Big Four’ banks, with only one in 100 users late on their payments.

Meaning that the vast portion of Zip’s revenue comes from more sustainable service fees.

Zip has also experienced significant growth in the first four months of the current financial year.

ASZ Z1P - Zip Co Growth Trajectory

Source: Zip Co.

The number of customers and revenue saw significant growth or 90% and 110% on a compounded annual growth rate basis.

The company also added that the November trading period is set for another Zip record.

What will get the share price moving?

Zip’s foray into the US market could be stalling the share price with COVID-19 cases still ticking upwards, stifling the country’s economic recovery.

The company bills the US as its ‘growth engine’, which has an addressable retail market of around $5 trillion.

Once things begin to clear up there, and domestic unrest also settles, we could see some momentum return to Zip’s share price, in my opinion.

Zip has also launched in the UK, but with a second wave of COVID-19 recently sweeping across the island nation, user growth too may be hampered.

However, the outlook is positive for Zip.

Having announced a partnership with eBay back in August and plenty of the world still in lockdown, the Christmas period could see Zip make decent gains.

Right now, they look like they’re stuck in limbo.

The company is left wanting for growth opportunities, rather it’s the risk associated with their current opportunities that could be hampering the share price.

Not to worry though, if you missed the Zip Co train you can still check out these three innovative Aussie fintech stocks with exciting growth potential. Download your free report now.

Regards,

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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