Site menu

Search by ticker code:
Generic filters

Menu

Search by ticker code:
Generic filters

Search by ticker code:
Generic filters

Is the worst finally over for the Zip (ASX:Z1P) share price?

The Zip Co Limited (ASX: Z1P) share price and other buy-now-pay-later (BNPL) companies continue their downwards trend as investors shift away from high-growth tech names.

Zip shares are currently changing hands for $2.6 each, down a huge 81% from their all-time highs reached at the start of last year. Is the worst finally priced in for Zip?

Source: Rask Media Z1P share price chart

Tide brings down all boats 

Negative sentiment has spread across the broader tech and BNPL sector. Last week, US-based BNPL competitor Affirm Holdings Inc (NASDAQ: AFRM) reported its latest quarterly results, which caused shares to finish 21% lower by the end of the day.

While Affirm is still growing its top line roughly in line with expectations, this has come at the cost of short-term profitability. Affirm’s net loss for the quarter was $157.9 million, compared to $26.6 million from a year ago.

In a rising interest rate environment, unprofitable businesses with cash flows far into the future will have more discounting involved in valuation models, resulting in a lower estimate of its intrinsic value.

Business still growing

Zip last updated the market for the three months ending 31 December 2021. Similar to Affirm, Zip is still showing strong signs of momentum. The business has continued to sign up merchants and make complementary acquisitions, allowing quarterly revenue and transaction volumes to grow at 58% and 53%, respectively year on year.

Source: Z1P Q2 FY22 update

This update didn’t delve into any profitability metrics, however. Looking back to the FY21 investor presentation, Zip recorded a loss before tax of $359.6 million after adjusting for the QuadPay acquisition.

Zip is unprofitable at the moment as it continues to embark on a land and expand strategy to bring new customers to its platform. With its customer base of over 9.9 million and growing, these could prove to be valuable customers if they remain loyal to the Zip brand over their customer lifetime.

Summary

Zip operates in a high-growth industry that will likely ride the wave of continued adoption of e-commerce and digital payments. The addressable market is large and growing, a quality we look for as part of the Rask investment philosophy.

This blue sky scenario should be considered alongside potential risks, however. With various BNPL players offering a similar service, Zip will likely need to continue to innovate and differentiate itself to retain its growing customer base.

If you’re looking for some ASX share ideas, check out this article: 3 ASX shares I’m looking to buy this month.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our Terms, Financial Services Guide, Privacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.
Skip to content