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Zip Co Ltd (ASX:Z1P) shares take off following Virgin Australia Holdings Ltd (ASX:VAH) deal

Corporate travel jet flying into sunset

One of the best performers on the local market today has been the Zip Co Ltd (ASX: Z1P) share price.

In late morning trade the payment solutions company’s shares are up almost 5% to 98 cents.

Why are Zip Co’s shares taking off today?

This morning Zip Co announced that it has partnered with Virgin Australia Holdings Ltd (ASX: VAH) to offer its interest-free payments to the airline’s travel customers.

This builds on a deal with Virgin subsidiary Tigerair that was announced in March and went live in the middle of April.

Zip CEO and managing director, Larry Diamond said: “We are thrilled to partner with Virgin Australia. We see a great fit between our brands and ‘customer first’ attitude. The Zip solution compliments (sic) the Virgin offering and will provide customers with payment choice. We look forward to delivering for Virgin Australia and their guests.”

According to the release, the company feels the deal is in line with its strategic vision and expects it to result in a growing presence in the travel and leisure sector.

The integration process will commence in the coming months and could be a big boost to transaction volumes in FY 2019.

In FY 2018 transaction volume came in at $542.9 million, up 136% on the prior corresponding period. Management is aiming to almost double this again this year, targeting transaction volume of more than $1 billion in FY 2019.

As well as the Virgin deal, the company’s transaction volumes should be given a lift from the recently announced arrival of Super Retail Group Ltd (ASX: SUL) brands onto the Zip platform.

Should you invest?

While they are certainly high risk investments, I think both Zip Co and rival Afterpay Touch Group Ltd (ASX: APT) have a lot going for them at the moment and could be worth a closer look.

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Returns as of 6th October 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO and Super Retail Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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