Why is the Zip Co share price rising today?

Posted: 24 May 2021 12:35 pm

Shares in BNPL provider Zip Co have lost 20% of their value in the last month alone.

Buy now pay later operator Zip Co Ltd (ASX: Z1P) was among the top gainers on the ASX on Monday morning. Zip shares, which haven't been in the best of form recently, had jumped more than 4% to $7.40 in early trading before easing.

At the time of writing, Z1P is trading 1.5% higher.

Why the Zip stock price is lifting

The buy now pay later provider on Monday announced it is raising stakes to take control of UAE-based Spotii Holdings and Europe-focused Twisto Payments.

Zip will pay $160 million for completing the two deals in either cash or shares.The company already had minority stakes in both businesses.

The Australian company noted that Europe is an eCommerce market worth $1.1 trillion annually and Twisto's licence can be "passported to all 27 member states of the European Union". It also pointed out that Spotii operates in the Middle East, one of the fastest-growing global eCommerce regions.

"These strategic transactions will enable Zip to respond to the increased demand from merchants for a single global BNPL solution across multiple markets with a consistent global service quality," it said in a statement to the stock exchange.

Indeed, while its bigger rival Afterpay (ASX: APT) has run away with all the headlines, Zip has also delivered strong sales growth in recent years, thanks to the increasing popularity of the BNPL payment method as well its international expansion.

Widening international footprint

The Australian fintech provider boosted its international footprint last year when it announced the acquisition of New York-based QuadPay for $403 million, giving it a strong foothold in the world's biggest retail market.

That acquisition has paid off for Zip, with annual transactions soaring over 200% since the deal.

It compared the current transactions to the QuadPay deal, saying it is adopting a similar playbook to grow in the market.

"Zip has adopted a similar approach to Quadpay, which proved to be highly successful. By initially making low-risk minority investments, Zip is well placed to validate cultural fit and management alignment, stress test the business plan and identify synergies, and plan for integration," the company said.

The deal comes at a crucial time for Zip, which like its BNPL peers has been facing the brunt of investor concerns about the impact of rising interest rates and rising competition on the business model.

Zip shares have so far lost 20% of their value in the last month alone, although the shares have risen around 15% over the last six months.

But some in the market still believe in the company's future. Analysts at stockbroker Morgans recently put a price target of $10.30 on the Zip stock.

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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