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Where next as Zip’s Q3 revenue skyrockets 96%?

We examine the key figures from Zip’s latest set of quarterly results, released to the market on Wednesday.

Zip share price in focus Source: Bloomberg

In spite of uncertainty, chaos and general market declines – the buy now pay later (BNPL) sector continues to power forward. Afterpay has rebounded from recent lows and Zip (Z1P) yesterday posted an impressive set of third quarter results.

Results at a glance

As part of its latest results release, Zip revealed that its Q3 revenue had skyrocketed 96% (YoY), its Q3 transaction volumes had soared 84% (YoY) and its active customer-base had ballooned to 1.95 million.

Maybe most impressively though, Zip reported that its total third quarter transaction volume hit $518 million – implying annualised transaction volumes of approximately $2.1 billion.

'Despite the economic impact of COVID-19, the Zip ANZ business continues to perform strongly, with healthy customer growth, transaction volume, and a strong pipeline of new partners in the March quarter,’ Zip's CEO, Larry Diamond, said.

As a further positive – particularly when framed against the current flurry of capital raisings being launched in Australia – Zip’s management noted that the company is:

'Well-funded and uniquely positioned to trade through the current environment, given our product differentiation, strong proprietary credit platform, healthy repayment profiles and penetration into defensive, everyday spend categories.’

As an aside, though many people anecdotally assume that Afterpay’s user-base consists mostly of millennials on the lower-end of the socio-economic spectrum, research from Morgan Stanley actually found that:

‘The greatest frequency of Australian BNPL users is in the A$60-70k income range – highlighting that BNPL users aren’t necessarily skewed to low-income millennials.’

In spite of all this, Zip traded in a volatile fashion during Wednesday’s session: Deviating between a low and high of $2.00 and $2.330 per share. Things improved a shade on Thursday, with the Zip share price rising some 2.4% – to $2.130 per share – a little before noon.

Even so, the broader context for shareholders is a somewhat dour one: at current price levels Zip trades well off its 52-week high of $5.860 per share.

Zip share price: where next?

Looking forward, Zip had previously set two lofty full year targets: one, achieve annualised transaction volumes of $2.2 billion by the end of the financial year (EOFY); and two, hit 2.5 million global customers by EOFY.

While Zip is confident that it will reach its annualised volume target – the 'current economic conditions and delayed launch in UK, has impacted the Company's ability to reach its global customer target,’ management noted.

Even so, Zip’s 1.95 million active users stands out as an impressive achievement.

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