Appreciate you taking the time to respond.
I agree that Zip is unlikely to get as big/catch Affirm - but I also don't need Zip to do this for it to be a worthwhile investment. I'm happy with Zip carving out its own niche and maximising value from its customer base, and there are more than enough customers to share around without cannabilising each other's sales in this industry.
What price would you consider to be fair value? And what is the justification for that price? Pending Trump's decisions, I could easily see Zip being $4-5 by Xmas this year. If not for the tariffs, I think Zip would currently be over $3.
Regarding the economic downturn, Zip has just endured a terrible macroeconomic environmnent for the past few years - and come out the other end stronger than ever. And an economic downturn may also drive more customers to needing services like BNPL which may result in higher bad debts but may also result in increased customer numbers/growth. Regardless, this is only a factor if you are forecasting an imminent economic downturn - is that what you are predicting? If so, why? Also, given Zip's intentional tighening of criteria and ability to prevent bad debts decreasing despite a negative macroeconomic environment, why wouldn't you have confidence in their ability to maintain current bad debt levels or at least choose to increase bad debts for a good reason?
Fair point regarding something having changed between July-December and regarding the actual profit being lower. I guess in my mind I see Zip having gone through many years of massive losses and unsustainable business practices, and they have turned this around significantly to the point that I consider Zip as being essentially break even currently, which is a massive achievement considering where they were a few years ago. So I'm less focused on whether their profit is slightly lower or not, and more focused on the massive improvement/trend over the past couple years - and am extending that trend as a forecast into the future. And if they continue on this trend line then I think the share price will increase drastically to reflect this - I'm less focused on the specific profit numbers.
But also if you're looking for what has changed between July and December, I think it's clear that they have started marketing more, onboarding more customers, loosening application criteria slightly to grow faster. And given their previous accomplishments, and their mantra of focusing on sustainable profitability, I trust the leadership team to make the decisions necessary to balance growth with bad debt control.
With bad debts, my understanding would be that if a customer misses a payment they would soon be prevented from spending any more via Zip. So let's say Zip manages to get a million new customers - naturally some portion of those customers are going to be "bad". And I'd argue that typically the type of customer to get bad debts and never pay them off will incur that debt pretty quickly once they are on the platform - I think it's far rarer for someone to be making payments for months or years and then all of a sudden get into financial trouble and not pay their debts. So out of those new million customers, the porton of bad customers will quickly be identified and removed - so initially there will be a spike in bad debts. But this spike should be temporary as those "bad" customers are removed from the platform, and many of the remaining "good" customers will continue using Zip providing long term revenue and benefit.
In other words, I acknowledge that the bad debts/provisions have increased significantly, but I think it is a calculated and informed decision by the leadership team in an effort to increase growth and I fully support that decision. I don't think the bad debts increasing significantly is representative of a negative trend or underlying issue.
Appreciate the discussion though, and it has certainly broadened my understanding and appreciation of the company and the complexities involved, so thanks for that!
Look forward to your insights regarding Sezzle once you have a chance to review it more thoroughly.
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