Zip share price rises on Facebook partnership reveal

We examine the details concerning the company’s recently announced Facebook partnership as well as look at why one investment bank believes Zip may soon have to tap the capital markets.

Zip share price rises on partnership news

The Zip share price rose modestly during Friday’s session after the fast-growing Buy Now Pay Later (BNPL) company revealed it had partnered with social media giant Facebook.

Centrally, as part of this partnership, which is currently still in the testing phase, Zip said it was aiming to help small and medium-sized businesses using the Facebook platform gain access to flexible lines of credit. As the company has previously noted, this line of credit can be used for everything from marketing expenses, inventory purchases and cashflow management initiatives.

Zip first announced the launch of Zip Business in August, initially rolling out the new offering through a partnership with eBay.

In reflecting on this newly minted partnership, Zip's Co-founder and Chief Operating Officer, Peter Gray, said:

'Providing Zip as a payment option makes Facebook advertising even more accessible and valuable to business owners and helps smooth their cashflow'

‘Partnering with Facebook is an important step not only in the expansion of Zip Business, but in helping small business owners to capitalise on recent growth in the ecommerce sector and to get ahead.'

Reflecting on this partnership, Director of Facebook Australia and New Zealand, Paul McCrory said:

‘Small to medium businesses are the heartbeat of the Australian economy. When businesses succeed the entire community benefits. We are excited to launch the buy now pay later advertising payments integration, that will help businesses access capital to grow.'

Interest fades following initial Zip Business announcement

The Zip share price surged off the back of the launch of Zip Business, touching a high of $9.950 per share in response.

Since then however, the stock has progressively drifted lower, underperforming its large-cap BNPL rival, Afterpay, in the process. This underperformance comes even as Zip has continued to notch up strong growth, recently reporting triple-digit transaction volume and customer growth, on a year-over-year basis, in November.

This strong growth has led analysts from Citibank to speculate whether or not Zip may soon be required to tap the capital markets.

Centrally, the investment bank, which has a Neutral rating on Zip, argued in a recent note to clients, that: ‘our forecasts assume Zip raises $100 million in additional equity in 1H22e.’

The investment bank added that:

‘There is potential that this could be required earlier and the size of the raising could be larger, especially given strong growth from Quadpay, step-up in marketing and promotional activity […] and potential entry into new markets (beyond UK).’

Citibank has a $6.40 price target on Zip.

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