Zip Co Ltd (ASX: Z1P) shares seem to have retreated as it continues to trend downwards from its record high in February. Will more partnerships push the Zip price up?
Z1P share price
Partnership with Propell Platform (ASX: PHL)
Propell provides a digital, cloud-based platform offering finance products to help small to medium businesses manage and optimise their cash flows.
This partnership will enable Propell to expands its transactional options.
Propell notes this will improve both the user experience with their end customer and importantly their own cash flow.
As a result, Propell believes this enhancement will assist in attracting new customers.
My thoughts
The race for market share is ramping up with Afterpay Ltd (ASX: APT) landing big merchants in the US.
This partnership highlights another avenue for buy-now-pay-later companies to gain market share.
It seems the market is using a Price to Sales metric to justify the valuation of BNPL companies like Zip and Afterpay.
However, such a metric fails to incorporate margins, the quality of the balance sheet and growth rates. Whilst these BNPL companies may have high revenue growth rates, it’s important to consider whether they can translate this into earnings or free cash flow.
In saying this, there are strong tailwinds in the BNPL sector.
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