Appreciate the response.
From my perspective, Affirm definitely has some advantages over Zip, but Zip similarly has advantages over Affirm (e.g. better profitability, exposure to more markets like Australia).
And Affirm is valued at a much higher multiple of their revenue - for example in 2Q25 they had a revenue of $866 million USD, and are valued at over 20 billion USD. Meanwhile Zip in 2Q25 had a revenue of $269 million AUD and is valued at $3.2 billion AUD. 23x multiple for Affirm compared to 12x multiple for Zip.
Similarly for Sezzle, in the same quarter as Zip and Affirm, they had a revenue of $98 million USD, and are valued around $1.7 billion USD. A multiple of 17x.
Obviously there can be other factors accounting for the discrepancy in the multiples across company, but it's a pretty big difference which I think is a solid indicator that Zip is undervalued compared to its peers.
In addition, in a low interest/low inflation environment BNPL thrived and was valued much higher. We are starting to see rate cuts in the US and AUS which is only going to increase the valuation for Zip and other BNPL companies - the core benefits being reduced funding costs (i.e. higher profit margin) and increased discretionary spending for customers (i.e. fewer bad debts, higher TTV etc).
I also don't consider the market to be highly competitive/saturated. In Australia there are basically just the 2 major players in this space (Afterpay and Zip). And the US has a massive market that can easily accommodate several large BNPL companies. Just think about how many banks Australia and the US have - there is more than enough room for a dozen profitable BNPL companies, although I think there will be consolidation in this space and likely be left with 2 major players in Australia (Afterpay and Zip) as well as 5 or so major players in the US (Klarna, Affirm, Paypal, Zip etc).
Regarding Zip's active customers being stretched - there are currently 2.12 million active customers in Australia, spending a TTV of $1,017 million. That means each customer in Australia is only spending $480 over a 3 month period, or approx $37 per week! Similarly, in the US there are 4.22 million active customers, spending a TTV of $1,567 million USD. That means each customer in the US is only spending $371 over a 3 month period, or approx $29 per week!
That is hardly financially stretched by any means and could easily double, triple or more. For example, I have a Zip Plus account and easily spend $2k+ per week on it. So there is plenty of room for growth from existing customers as consumer habits are changed and people use Zip for everything/as their main card.
Regarding the bad debts, Zip have managed to sustainably scale their revenue over the past few years without increasing bad debts, in a terrible macroeconomic environment with high interest rates and high inflation - so I trust that they are able to continue to scale their revenue while keeping bad debts under control as they start growing their customer base. Their bad debts are also on the low end of their long term target of 1.5% to 2.0%, so there is plenty of room for bad debts to increase without it being concerning provided it is accompanied with new customers, increased revenue etc.
I had a look at the previous post you mentioned and page 33 of the HY report you mentioned - I think the stats you've outlined are misleading. Think of it this way, imagine I had a business that made $100k revenue, and $1k bad debts written off. And then the next year I made $150k revenue and $2k bad debts written off. Using your logic this is a terrible sign, and bad debts increased by 100% while revenue only increased by 50% - however, in reality my company now has $49k extra revenue after bad debts are accounted for, and this is great. Similarly, if you look at page 33 of the HY report, during the 6 months leading to 31st December 2024, Zip's US receivables increased by $260,406,000 and the Stage 2/Stage 3 expected bad debts only increased by $9,906,000.
Also note that this is only their expected provisions for bad debts, and it is good that they allocate high provisions so that they have a solid buffer to protect themselves. It's good to be conservative with these types of estimates. I noticed your post didn't include the table on page 33 that outlines the actual data for current bad debts that are past due less than 30 days, 31 days to 60 days, 61 days to 90 days and 91 days to 180 days. That table shows that the actual bad debts have dropped as percentage of gross receivables overall.
At the end of the day, this business is about scale - and they are showing tremendous growth each year. They have done the hard yards the last few years restructuring the business, eliminating the corporate debt, focusing on profitable sustainable growth, dealing with high interest rates and inflation etc. And now it's full steam ahead - rates are being cut, inflation settling, focusing on growth, getting more customers on board, releasing several new products to drive additional revenue and diversify their revenue streams. It's going to be a great 12 months for the company in my opinion, unless Trump does something stupid of course.
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