Daily Price Movement / General Discussion, page-28008

For those of you losing faith in Zip, I thought it worthwhile sharing some analysis. For the purpose of this analysis, I am focussing purely on Zip's US business (Quadpay) and all numbers are in US$ (converted from A$ @ 0.74).

Affirm reported their 4th quarter and FY21 results overnight. Revenue for the year was $870m and customers at 30 June 2021 were 7.121m. At the top end of their guidance range, they are forecasting revenue to grow by 37% in FY22 to ~$1.2b. Their guidance also indicates that TTV in 1Q22 will be essentially identical to 4Q21 ($2.5b). Based on after hours indications, Affirm has a market cap of $28b (using an SP of $105.50 - 15% up on Thursday's close).

Quadpay's FY21 revenue was $140m (16% of Affirm's) and customers at 30 June 21 were 4.4m (62% of Affirm's). Whilst Zip does not provide guidance, they indicated that Quadpay's TTV was up 240% against pcp for the first 6 weeks of FY22. If this is maintained for the remainder of the quarter that would translate to 1Q22 TTV of $755m (30% of Affirm's guidance) or 19% growth on 4Q21. Zip in total has a market cap of $2.85b (10% of Affirm's).

Considering their relative market position and current growth rates, I struggle to see how Quadpay is not worth at least 25% of Affirm, or $7b (~A$17 per Zip share). Even if you cut that valuation in half, it leaves you with $8.50 per Zip share and you are getting everything apart from Quadpay for free.

With M&A in the BNPL sector only just getting started (Square acquiring Afterpay and PayPal acquiring Paidy), the metrics of Quadpay will not be ignored forever and I believe it is a highly appealing acquisition target for both Klarna and Affirm. Whilst recent SP performance has been disappointing (to say the least), I believe that the underlying business continues to perform extremely well.

Obviously this is all IMO and should in no way be construed as advice.