The Zip Co Ltd (ASX: Z1P) share price started the year at $1.09, climbed to $1.85 by the end of March and has more than doubled since. Currently trading at $3.52, the Zip Co share price has skyrocketed an impressive 220% higher so far in 2019.
Smashing quarter
Recently buy-now-pay-later (BNPL) provider Zip Co reported a stellar quarterly report which was well received by the market. Zip Co reported a record quarterly revenue of $23 million, which was 20% higher than the December quarter and double the previous March quarter. Receivables drove revenue and were 16% higher at $565.3 million, whilst underlying transaction volume was $281.4 million.
Despite flat transaction numbers, Zip Co's registered customer base grew 14% to 1.2 million. These figures were even more impressive given that the first quarter is typically the weakest for retail sales. Zip Co also managed to improve losses for the quarter with an improved net bad debt of 1.75%, down from 1.81%.
Further expansion
A $56.7 million capital-raising initiative in March allowed Zip Co to aggressively pursue new merchants whilst also facilitating expansion into New Zealand and investments into technology and data science. The company managed to sign additional reputable brands and companies such as Chemist Warehouse, Lorna Jane, Bupa Health, Lego and General Pants Co.
These companies join the ranks of an already impressive client base which includes the likes of Officeworks, Bunnings Warehouse, EB Games and Appliances Online. Zip Co recently announced further expansion into New Zealand by entering a new partnership with Super Retail Group Ltd (ASX: SUL).
Takeover possibility
The emergence of BNPL providers has disrupted traditional banking and credit card facilities. As a result, established institutions are considering expanding into the sector. Rumours circling earlier this year indicated that credit card and personal loans company Latitude Financial Services considered Zip Co a potential takeover target. However, given the meteoric rise of Zip Co's share price a takeover offer does not seem forthcoming. If the sector continues to grow at this rate, however, it should not be ruled out.
Foolish Takeaway
Equity analysts at Morgans recently retained an add rating on Zip Co, with a revised price target of $3.19. The broker cited the strong quarterly report as an indicator of the company's ability to improve operating leverage with scale. Although a broker note should not justify buying Zip Co shares, it shows where institutional sentiment lies in the short term.
I foolishly sold my shares in Zip Co earlier this year at around $2.00 and still suffer severe FOMO from the decision. I think the future of the BNPL industry is extremely promising and there is great potential still ahead for Zip Co and rival Afterpay Touch Group Ltd (ASX: APT). However, the recent surge in Zip Co's share price has gone too vertical for my liking, I will be waiting for a substantial pullback before getting back in.
