Why is the Zip Co share price rebounding?

Posted: 8 December 2021 1:12 pm
News
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Shares in BNPL provider Zip Co are still down 30% over the last 6 months but has rallied on recent news.

Shares in buy-now-pay-later operator Zip Co Ltd (ASX: Z1P) are pressing ahead for a second session of hefty gains, and are also among the most traded shares on the ASX on Wednesday.

At the time of writing, the stock was already up nearly 9.5% to $5.23, on top of the 9% gains in the previous session.

What is driving up the Zip Co stock price?

Like other BNPL sector stocks, Zip Co shares have seen a slow, gradual decline over the last year over concerns about the sector’s growth and rising costs.

Zip Co shares are still down 30% over the last 6 months.

Amid the backdrop of this gloom in the sector, the BNPL operator has delivered numbers that seem like sunlight out of cloudy skies, and investors have cheered on for the last 2 sessions.

Zip Co on Tuesday reported a record transaction volume of $906.5 million in November, a 52% jump from a year ago.

That means on an annualised basis, the company has cracked the $10 billion a year milestone!

It also said customer numbers have increased 71% to 9.2 million, with the best performance in the world’s biggest retail market, USA (up 92%), and a steady 27% increase in its ANZ home market.

Transaction numbers surged 86% to 7.5 million.

“November was a very strong month for the Company, and shows the tremendous growth achieved since this time last year with many markets processing BNPL payments for the first time,” Zip’s managing director Larry Diamond said in a statement to the ASX.

Global push

Indeed, the Australian BNPL player has pushed ahead into growth markets over the last 18 months at a time when the COVID-19 pandemic has pushed young shoppers to look for easier access to credit amid a boom in online shopping and should be reaping the benefits over time.

This has included the acquisition of New York-based QuadPay, lifting stakes in UAE-based Spotii Holdings and Europe-focused Twisto Payments to boost operations in Europe and the Middle East, entering the high potential Indian market through a minority stake in India-based operator ZestMoney and an impending launch in Singapore via the Singtel Dash app.

“We enter CY 2022 with strong momentum, in a solid financial position, with continued focus on execution, unit economics and global synergies,” Mr Diamond said, while acknowledging the volatility in his company’s share price that has hurt investors.

He added that Zip Co is bolstering its global executive team to better handle both regional and functional execution, and in a separate announcement, revealed the appointment of former Deliveroo Australia CEO Levi Aron as its chief growth officer in the key US market.

Analysts at UBS took the latest update on board while upgrading their rating on the Zip Co stock to "neutral" from "sell" previously. Their 12-month price target for the stock has been tweaked to $5.20 from $5.50 a share previously.

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