The Zip Co Ltd (ASX: Z1P) share price could be a mover today after the buy now, pay later business released its FY21 second quarter update.
Zip’s strong update
Zip said that it achieved record quarterly revenue of $102 million, up 88% year on year. The December revenue was $40.2 million, up 94%.
The revenue growth was driven by record quarterly transaction volume of $1.6 billion, up 103% year on year. The December transaction volume was $628.4 million, up 104%. Transaction numbers were up 149% year on year to 10.7 million.
Customer numbers and merchant numbers continue to rise. The number of customers rose by 97% year on year to 5.7 million and merchants on the platform rose by 73% year on year to 38,500.
Looking at the North American division, Zip US (QuadPay) delivered a record result across all core metrics. It generated $673.1 million of transaction volume, $47.6 million of revenue and attracted 915,000 new customers. December transaction volumes exceeded November by 7.5%, despite the entire Black Friday and Cyber Monday weekend falling in November.
During the quarter, Zip raised a total of $176.7 million by issuing new new shares, with the funds being used to fuel the US growth opportunity.
Zip UK
Zip launched its UK business in December. The company has 150 merchants already live and transacting, with partners like Boohoo, JD Sports and Fanatics. Zip said a key pillar in the strategy will be using Zip’s virtual card technology allowing customers to transact anywhere, online or in-store.
Management comments
Zip CEO Larry Diamond said: “We are extremely pleased to deliver another exceptional set of numbers with the quarter really delivering a significant step change for the company, confirming our position as one of the fastest growing players in the sector.
“A number of strategic initiatives were delivering during the quarter, in line with our mission to become the first payment choice everywhere, every day, and we are extremely well placed to continue this momentum into 2021 as the global shift away from the broken credit card model continues. Particularly exciting were the results achieved in the US with QuadPay rapidly accelerating in the largest addressable market for BNPL.”
Summary thoughts
Zip shares are much lower than they were in August and October, but I’m not sure that it means it’s worth buying today. The growth is impressive, but how much growth does it need to generate each result to justify its $3 billion valuation and the current share price? We’ll see today and in the coming weeks.
I think Zip could be better value than Afterpay Ltd (ASX: APT), but in the payments space I’d rather buy ASX growth shares already making good profit like Pushpay Holdings Ltd (ASX: PPH).
