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The Zip Co share price is soaring again, is the stock a buy?

Posted: 26 August 2020 3:35 pm
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The Zip Co (ASX:Z1P) share price has hit a record high following the announcement of a new business lending product in partnership with eBay.

Zip Co shareholders will be happy to see the company's share price has once again surged. Zip Co shares (ASX:Z1P) were up more than 25% as of midday Wednesday, and broke through the $9.00 mark for the first time. This is following lows of just $1.00 only six months ago in March.

So what's the cause of the latest price surge, and should you buy Zip Co shares?

Why is the Zip Co share price up today?

The rise is due to the Buy Now, Pay Later provider announcing a new business lending product, Zip Business, in partnership with online retail giant eBay. The new product will allow its small business customers, of which it has 40,000 already, to access flexible lines of credit within the eBay marketplace.

This means that these small businesses which use the eBay marketplace to sell products can now access credit via Zip Business to fund things like short-term campaign costs and inventory, to help manage cash flow.

Should you buy Zip Co shares?

The Zip Co share price has been one of the best performers in recent months, up more than 850% since March. As well as this latest news, there's been several other big announcements from the company which have helped drive a lot of this rise in the share price.

In June Zip Co announced it was acquiring US-based Buy Now, Pay Later giant QuadPay. This acquisition, which is set to be completed on 31 August 2020, will see Zip Co become a global player in five different markets and with almost four million customers. Zip Co shares surged 80% within a couple of days of this announcement.

Zip Co has also continued to report strong growth even throughout the pandemic, along with rival Buy now, Pay Later companies Afterpay and MoneyME. New player MoneyME beat market expectations this week when it revealed its annual net profit was up 300%.

Despite this great run in Zip Co's share price, leading broker UBS rated the stock as a 'sell' on 25 August and set a price target of $5.70 for its shares. This represents a fall of about 40% from the share price on 26 August.

Similarly, Macquarie analysts have set a price target of $5.45 per zip Co share. The rating update said that "Despite being a clear No 2 in the market, the broker notes Zip Co's growth has slowed more recently and compared to peers the company has taken a more conservative approach." However, this rating was from mid-August so does not take into account the latest announcement of Zip Business.

You can read more about Zip Co's share price, see the technical analysis rating and learn how to buy shares in our Zip Co buying guide.

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