Skip to content

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved.

Zip share price falls even as FY20 revenues surge 91%

‘The flight to BNPL is a global trend,' said Zip's MD and CEO, Larry Diamond, as part of today's Q4 results release.

(ASX: Z1P) Source: Bloomberg

Zip share price falls, growth remains strong

Capital markets are built and destroyed by expectations. Maybe nowhere right now is this idea better illustrated that by Australia’s buy now pay later (BNPL) sector.

Expectations for the fledgling sector are indeed high – as BNPL companies see their share prices and underlying business metrics seemingly exponentially tick skyward.

Growth or not, with many of these company’s unlikely to make a profit in the short-term, investors have turned to other metrics, such as revenue and user growth figures, to value them. While not uncommon to value growth-oriented tech companies on the basis of their revenue outlook – when these valuations become stretched – it’s not uncommon to see sudden and sharp sell-offs.

Demonstrating those points, Australia’s second largest buy now pay later darling Zip (Z1P) – though posting a growthy set of quarterly results on Wednesday – still saw its stock punished by investors. Interestingly, while the stock opened higher and hit an intraday high of $7.540 per share, by 1.36PM (Canberra time) Zip traded well off those highs, dipping to around $6.30 per share.

At the time of publishing, Zip traded at $6.65 per share (-5.54%).

Quarterly results in focus

Share price gyrations, the company reported robust growth across all of its key metrics as part of today’s fourth quarter results release.

Here, Zip recorded full-year FY20 revenues of $161.2 million, representing a year-over-year increase of 91%; against Q4 revenue of $46.4 million, up 72% on a year-over-year basis.

Annualised transaction volumes also came in significantly higher on a year-over-year basis, exceeding the company's previously set target – reaching $2.3 billion, representing an increase of 120%.

Zip's customers now stand at 2.1 million, up 197 thousand in the last quarter alone, while there are now a total of 24.5 thousand merchants on the Zip platform, it was noted.

A key argument of BNPL bears has been centred on the likelihood of these company’s seeing their credit performance deteriorate as a result of the coronavirus pandemic. On this front, the company said it was 'significantly outperforming the market,' noting that it boasted 'strong credit performance notwithstanding COVID-19 with net bad debts of 2.24% at the end of Q4.’

Further illustrating this point, between March and June, Zip’s monthly arrears fell from 1.55% to 1.33%. The company described this result as ‘outstanding’ given the current operating conditions.

Elsewhere, the company reported that Quadpay, which Zip acquired in an all scrip deal during June; in the fourth quarter delivered $233 million in total transaction value (TTV), $16.4 million in revenue. Quadpay had 1.8 million customers at the time of writing.

Looking forward, Zip said that once the acquisition has been completely finalised, the Group would have combined TTV of $3.2 billion against annualised revenues of $252 million and close to 4 million customers.

Speaking of these results, Zip’s Managing Director and Chief Executive Officer, Larry Diamond said that while the buy now pay later business model was tested during the coronavirus period, it ultimately has ‘proved extremely resilient,’ up to this point.

'Our product differentiation, strong proprietary credit platform and penetration into defensive, everyday spend categories delivered in spades.’

Mr Diamond went on to say that:

'We continue to believe the credit card model is fundamentally broke with customers demanding flexible, responsible, interest free alternatives - the flight to BNPL is a global trend.'

Want to trade BNPL stocks: long and short?

Create an IG trading account or log in to your existing account to get started now.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

Act on share opportunities today

Go long or short on thousands of international stocks with CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Take your position
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.