What has been the market reaction?
Initially, the Zip share price rose to $12.37 in early trading after the market got a look at the result. However, since then it has sunk around 7% to around $11.
What was in the Zip half-year result?
It generated record transaction volume (TTV) of $2.32 billion, up 141% year on year. At December 2020 its TTV is now annualising at more than $7.5 billion. It also made record revenue of $160 million, up 130% year on year.
Zip now has more than 5.7 million active customers, up 217% year on year. ANZ customers went up 39% to 2.5 million. The number of merchants increased by 82% to 38,500 and there were 30,100 merchants across Australia and New Zealand.
Zip said that it launched in the UK in December 2020 with a number of major brands including Cotton On, Fanatics, JD Sports and Boohoo. Gamestop and Sunglass Hut are two of the latest partners in the US whilst Harvey Norman Holdings Limited (ASX: HVN) and Adore Beauty Group Ltd (ASX: ABY) have signed on in Australia.
Australian net bad debts of 1.93% was among the leaders in the market in Australia. The percentage of arrears has been steadily been falling over the last 12 months, it dropped from 1.33% at 30 June 2020 to 0.95% at 31 December 2020.
One of the highlights of the update was Zip’s focus on new markets. It has a new markets team which evaluates opportunistic and strategic BNPL expansion options across the globe.
It’s proactively exploring the best entry path in targeted jurisdictions. It is also focused on lifting, shifting and scaling Zip’s offering globally. This team is also responsible for global merchant integrations with a number of recent successes such as Boohoo and Cotton On.
Zip has also invested in a number of BNPL investments in Europe and the Middle East as well as well as preparations for a soft launch in Canada. It has made a minority investment in a leading BNPL player in the United Arab Emirates. It has also made a minority investment in another player in Eastern Europe (Czechia and Poland), operating since 2014, with the ability to passport licensing across the EU.
Zip continues to target growth. New markets, more customers and merchants, new diversification and better unit economics can help produce stronger shareholder returns.
However, I’m not sure if buying at this Zip share price makes a lot of sense at the moment considering all of the growth that’s priced in right now.