Zip share price: why one top broker sees more upside on the horizon

UBS sees further upside for the Zip share price – though the investment bank views the recently completed cap raise as mostly immaterial to its valuation.

Still a ‘buy’

The Zip (ASX: Z1P) share price has fallen today, after the company's stock resumed trading following the completition of a $60m capital raise initiated last week.

By 1:32 AEST Zip’s shares were down 4.21% – ultimately bringing it more in-line with the capital raise placement price of $3.70 per share.

Though the market has proved somewhat skittish, UBS has taken today as a chance to reiterate their BUY rating and 12-month share price target of $4.80 on the fast-growing buy now pay later company (BNPL).

Interestingly, UBS noted that this cap raise had a ‘relatively’ immaterial impact on their valuation of the stock.

Moreover, while the investment bank’s 12-month price target implies significant upside, UBS stressed that because Zip is still a relatively early-stage company, the investment is somewhat speculative in nature.

Even so, this hasn’t stopped UBS from predicting significant top and bottom-line growth from the young BNPL company in the years ahead.

On the top-line, UBS sees Zip growing its revenue from an estimated $167m in FY20 all the way up to $502m in FY24.

Earnings (net earnings) are expected to grow in step – transiting from an $11m loss in FY19 to an expected $10m gain in FY20 and running as high as $88m in FY24.

Practise trading Australian tech stocks with an IG demo account now

Zip share price: the impact of regulation?

UBS also took today as a chance to ponder the potential implications of the RBA’s recently released ‘Review of Retail Payments Regulation’ – Issues Paper.

As it relates to the likes of Zip (ASX: Z1P) and Afterpay (ASX: APT), this Issue Paper highlights the impact of and relationship around the ‘no-surcharging’ rule between merchants and buy now pay later providers (BNPL).

Summarising the issue and as a key section of the Paper revealed:

‘Stakeholders such as smaller businesses have observed that the cost of accepting BNPL payments – in terms of the fees paid by the merchant to the provider – is often in the range of 3–6 per cent and is generally higher than the cost of accepting other electronic payment methods such as cards.’

With it further being added that:

‘Most BNPL providers also have rules that prevent merchants from levying a surcharge on the customer to recover those fees.’

Centrally, if the RBA halted BNPL providers from levying those surcharges, UBS points out that it would rank as a key negative for the likes of Zip and Afterpay.

In saying that, the investment bank not only noted that the true impact of these potential changes would prove difficult to quantify at this point; but that Zip’s business-model – due to its comparably more diversified focus – is less exposed to regulatory disruption relating to these kinds of changes, compared to the likes of Afterpay, which is less diversified.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

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.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

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.