There are at least three reasons why I prefer Zip Co Ltd (ASX: Z1P) shares to Afterpay Touch Group Ltd (ASX: APT) shares.
Both businesses are seeing share price growth today, despite worries about the global share market. The Afterpay share price is up 11% at the time of writing and the Zip share price is up by almost 3%.
But here are some reasons why I think Zip could be a better buy than Afterpay today:
Less investor excitement
Today's Afterpay news about AUSTRAC has sent the Afterpay share price above $35. Afterpay is certainly an impressive business but we need to be careful about the price we pay for shares, particularly when it seems to be hitting peak popularity.
At this price you should be thinking about holding Afterpay shares for a long time to justify the price. But Zip is growing really fast too, its revenue grew by 138% in FY19 on the back of transaction volume growth of 108%.
Less reliant on fashion
I like that Afterpay is diversifying its underlying sales into different industries like dental. But it appears to be generating a lot of its underlying sales from fashion, which could be less reliable than other industries.
But Zip outlined that it has good diversity of its underlying sales with 21% being 'home', 6% in health, 4% auto, 2% travel and the entirety of 'retail' makes up 52% of underlying sales. These underlying sales may prove to be more reliable in a downturn.
Better diversification
Zip has recently made a number of acquisitions that have diversified its global underlying sales and it's also going into the business pay now, pay later space, and accelerated that with its Spotcap acquisition.
This increased diversification by geography and customer could be a great move to give Zip more avenues to grow faster than Afterpay.
Foolish takeaway
Neither Zip and Afterpay are cheap, and I'm not personally going to be buying them, but I'd rather think about Zip over Afterpay at the current share prices due to the above reasons.
