Zip Shares Tank 7% after June Quarter Figures Fail to Impress (ASX:Z1P)

What a difference six months can make…

Back in February, in the days leading up to their half-year result, Zip Co Ltd [ASX:Z1P] was flying. Trading at an all-time high of $14.53 per share!

Today it is now down to less than half of that, currently trading at $7.02, and falling. With a 7.45% plunge in the share price today alone.

All of which is stemming from their latest quarterly update.

So, let’s take a gander…

New records, but no joy for Zip

At face value, Zip’s results for Q4 FY21 look damn good.

Revenue is up 104% year-on-year, sitting at $129.9 million. And transaction volume peaked at $1.8 billion, also up 116% year-on-year.

Much of which has been fuelled by an 87% increase in customer numbers. With 7.3 million people now using the buy now, pay later (BNPL) service. As well as an 84% increase in merchant partners, with 51,300 businesses tied to the Zip platform.

So, why is the stock plummeting in share price?

Well, there are two possible reasons.

Number one, investors may be deciding to take profits after the stock spiked to $7.80 at the market open this morning. A scenario that is certainly feasible considering Zip’s shares have been relatively flat in recent months.

Or number two, investors were hoping for even stronger results. With the high-growth trend of the ‘buy now, pay later’ frenzy of 2020 still raising expectations. Expectations that Zip may not have met in the eyes of some.

Perhaps it may even be a combination of these two trains of thought.

Either way, the stock is struggling despite posting some enviable figures. With CEO, Larry Diamond, doing his best to highlight the incredible result:

Another outstanding set of results, including over 100% YoY growth in both revenue and TTV for the group, with record numbers delivered across the business in all regions. In addition to the very strong financial performance, we continued executing on our global BNPL expansion strategy across both the developed and emerging markets.

We are now a truly global player with a presence in 12 markets, and this is a real point of difference as we target global retailers and fulfill our mission to become the first payment choice everywhere, every day.

What’s next for the Zip Share Price?

With all that being said, the path forward for Zip seems relatively simple. They are clearly content with this aggressive growth direction, even if investors expect more.

Because while the stock may be trading lower today, the results are still extremely impressive. Especially as Zip furthers its efforts in the US and UK markets.

Both of which will be key to the company’s future plans.

As for whether you should invest in Zip right now, well, that is harder to say. They’ve got a lot going for them, but they’re also an incredibly pricey stock. And as the BNPL sector continues to face competition, it’s hard to say which companies, if any, will survive.

However, when it comes to the broader fintech industry, there is a lot to look out for. With plenty of other up-and-coming names that are worth checking out. All of which we’ve detailed in our comprehensive fintech report, including three small-cap picks you need to look out for.

Check it out for free, right now, right here.


Ryan Clarkson-Ledward,
Editor, Money Morning

PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here

Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks by dissecting the latest events affecting the world.

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