Why has the Zip Co share price been running higher?

Posted: 4 August 2021 3:05 pm
News
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Shares in BNPL provider Zip Co have surged more than 20% in the last week.

Buy now pay later (BNPL) operator Zip Co Ltd (ASX: Z1P) is typically among the top traded shares on the ASX. It has also been among the top gainers. On Wednesday, the stock was again up 2.4% to $7.97 at the time of writing.

What is driving up the Zip stock price?

Shares in Zip have been on fire since BNPL market leader Afterpay (ASX: APT) announced that it had agreed to a $39 billion (US$29 billion) takeover offer from US financial services and digital payments company Square.

That has heightened expectations that Zip Co, which is the second-largest BNPL operator on the ASX, will itself be a takeover target. Last month, media reports suggested that Sweden-based BNPL giant Klarna had likely been building a stake in Zip, in a move to strengthen its market position.

Zip has been in the spotlight in recent months for expanding its international presence by lifting stakes in UAE-based Spotii Holdings and Europe-focused Twisto Payments to boost presence in Europe and the Middle East, among the fastest-growing global ecommerce regions.

The Australian fintech provider had already expanded its footprint last year following the acquisition of New York-based QuadPay for $403 million, giving it a strong foothold in the world’s biggest retail market and which has already delivered strong sales and transaction growth.

Fund interest

Meanwhile, with Afterpay set to exit the ASX boards after its takeover by Square (which will issue its shares to Afterpay shareholders), market watchers also expect rising interest in Zip Co shares from investors keen to invest in pure play BNPL stocks.

That may likely explain the surge in Zip Co shares over the last few days, with the stock rising more than 20% over the past 5 sessions. Some believe they have still some way further to go.

Analysts at Citi this week retained their buy rating and set a $8.90 price target on the company’s shares. That would imply a potential upside of 12.5% over the next 12 months.

Zip shares have already risen more than 30% over the past 12 months.

Considering investing in Zip Co shares?

If you are keen to buy Zip shares, you should consider investing through an online share trading platform.

Keep in mind that not all platforms offer the same list of stocks. Some trading platforms offer US stocks only, so make sure to select a platform that offers ASX-listed stocks.

Choose from the dozens available for Australian investors. Compare the features and fees from the plethora of trading platforms available for Australian investors.

Looking for a low-cost online broker to invest in the stock market? Compare share trading platforms to start investing in stocks and ETFs.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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