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Zip shares fall despite ‘record’ sales


ArvinIG

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The buy now, pay later (BNPL) operator saw a dip in its share price despite posting stellar first quarter results.

Zip share stock price analysis target ratings analyst bnpl australia buy sell watch
Source: Bloomberg
 
  • Zip (ASX: Z1P) share price inched down to close at A$6.75 on Monday (18 October)
  • The group saw sales almost double to A$136.8 million for the first quarter of fiscal 2022
  • Citi analysts recently downgraded the stock to ‘neutral’ from ‘buy’
  • Keen to take advantage of Zip’s falling share price? Open an account with us to short the stock now.

Zip stock price: what’s the latest?

Zip shares closed 1.5% lower to kick start the week, following the release of its latest quarterly result.

The group posted a ‘record’ revenue of A$136.8 million in the quarter ending 30 September 2021, an 89% year-on-year increase.

Quarterly transaction volume also more than doubled from the same period a year ago to A$1.9 billion on the back of all-time high transaction numbers of 14.7 million (up 177% year-on-year).

Customer numbers also jumped up 82% to 8 million, while merchants on the platform increased to 55,200, based on the latest set of unaudited figures.

‘The continued growth of the business across all key metrics in the face of significant external challenges, yet again proves the resilience of the Zip business, and demonstrates the significant size, and early stage of the global BNPL opportunity,’ said Zip Managing Director and Global CEO, Larry Diamond.

During the quarter, the BNPL firm also successfully completed a global rebrand in six countries from Quadpay to Zip, as well as entered into an agreement with Microsoft to integrate Zip’s instalment payment technology natively into the shopping experience within the Microsoft Edge web browser.

What’s next for Z1P?

In terms of stock outlook, Citi analysts recently downgraded their rating from ‘buy’ to ‘neutral’ and price target to A$7.40 from A$7.95 a share.

‘Zip’s app downloads were down for the sixth consecutive month in September,’ said the investment firm.

‘We have lowered US customer growth assumptions and forecast 4.957 million customers in the US in 1Q21, which assumes customer net adds of 520k in 1Q22e.’

The new forecast works out to be 14% lower in net customer additions as compared to the figure of 608,000 recorded in the fourth quarter of 2021.

The analysts foresee capital risks ahead for Zip, stating that they expect operational expenses to increase.

‘With A$462 million of cash available as of Jun’21, Z1P has ample balance sheet capacity to funds its growth, including the recent US$50 million investment in Indian BNPL operator ZestMoney,’ Citi wrote.

‘However, we do see potential need for an equity raise, especially if Z1P accelerates its international expansion strategy.’

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Kelvin Ong | Financial writer, Singapore
18 October 2021

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