Today's market move was a bit surprising but when you read the AFR article, the $10 mark seems to be much closer. In my opinion you don't even need to wait until Xmas to reach $10 mark.
Those who do not have access to AFR, I've copied text, without any intention to breach copyrights.
Almost half of Zip's customers are now based in the United States, where its newly acquired QuadPay grew revenue by 50 per cent and volume by 42 per cent in the September quarter, compared to the three months to the end of June.
Zip, which offers instalment payment options and more traditional credit products, said active customers hit 4.5 million, more than double the previous quarter as 628,000 new customers came onto the app.The Australian Zip business has 2.3 million, with QuadPay now accounting for 2.2 million. Zip co-founder Larry Diamond: "Customers are continuing to increase their online spend in response to COVID-19 supported by Zip’s products." Peter BraigThe stock closed 4 per cent lower at $7.58, as investors who had bought on the rumour sold on the fact. RBC Capital Markets said Wednesday's numbers showed ongoing moderation in growth in Australia and New Zealand in line with its expectations but the US business was "a beat, as we had anticipated in our latest US app download analysis". The buy now, pay later provider's net bad debts climbed to 2.43 per cent for the first quarter of 2021, compared with 2.24 per cent in the fourth quarter of 2020 and 1.84 per cent at its third quarter. Zip is targeting between 2 per cent and 2.5 per cent.
But late payments improved: arrears fell to 0.91 per cent, from 1.33 per cent in the fourth quarter, which Zip described as "an outstanding result in the current climate". RBC said it expects net bad debts to peak in the coming months.Zip's record quarterly transaction volume of $943.1 million delivered revenue of $71.7 million for the first quarter, up 96 per cent on the pcp.
Of this, $23.4 million was from Quadpay, the New York-based firm Zip paid $400 million for in June. Merchants accepting Zip increased by 69 per cent over the past year to 34,000.Chief executive Larry Diamond said the current quarter "has begun solidly in all markets, which is seasonally the strongest as we run up to Prime Day, Black Friday, Cyber Monday, Christmas and Boxing Day.
Customers are continuing to increase their online spend in response to COVID-19 supported by Zip’s products that provide a better and fairer, digital alternative to the credit card."RELATEDZip Co moves to end US FOMO with acquisitionRBC Capital Markets analyst Tim Piper said in a client note that first quarter trading "has benefited from the extended shift to online spending as these companies acquire many customers at checkout. While the top-line performance is pleasing, the fact that arrears rates have seen a significant step-down in [the first quarter] and hardship claims are non-existent highlights the advantage that the BNPL [buy now pay later] players have with low account balances, dynamic credit-decisioning, and high receivable book turnover.
"Zip shares fell 2 per cent to $7.76 in early afternoon trading, reversing incredible gains of 25 per cent in the past fortnight. Shares recovered heavier losses as the session continued on Wednesday.Recent momentum came as Shaw and Partners analyst Jonathon Higgins sent out a note last week saying QuadPay was fending off stiffer competition in the US from the likes of PayPal - whose entry into the "pay in four" instalments market sent share prices across the ASX listed sector skidding at the start of last month."We should remain watchful of competition. However, there’re many years of supercharged growth still ahead in the USA and internationally," Mr Higgins said. Shaw estimates BNPL could have 80 million active customers in the US within three years and account for 14 per cent of all online retail."Irrespective of competition we see all US and international BNPL participants accelerating out to January in a blue ocean. Whilst PayPal’s entry has tempered terminal values and near-term exuberance there remains significant differentiation and value of offer.
"Zip said its new business-lending product had seen no requests for hardship support since July and net bad debts were 3.9 per cent. Over the quarter there was a recovery in loan enquiries, with new originations up 66 per cent on the quarter with 38 per cent underwritten by the government's SME loan guarantee scheme.Zip said it remains on track to launch in the UK in this first half, "with a strong merchant, channel, and partner pipeline being developed" and 20 staff in London.Virtual cardSimilar to Klarna but different to Afterpay, Zip has developed virtual card technology that allows a customer who open the Zip app to buy even when merchants are not integrated with Zip. Afterpay only allows payments in partner merchants. This came after Zip received a 'principal issuer license' with Visa that enables users to create Zip-branded virtual cards in real-time to shop at any online retailer where Visa is accepted.Following a successful pilot of 'Shop Everywhere' during COVID-19, Zip said last month it decided to permanently offer this feature to Zip app users, going live with the world’s first open-API modern card issuing platform Marqeta.
The update comes as Zip is raising $300 million in debt, as Street Talk reported this week. Zip said on Wednesday its undrawn facilities within the Zip Master Trust were expected to increase by this amount in the second quarter. It comes after the fintech issued $100 million in convertible notes and the same amount in warrants to US-based Susquehanna Investment Group to accelerate global growth.
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