One of the best performers on the All Ordinaries index this year has been the Zip Co Ltd (ASX: Z1P) share price.
Since the start of the year the payments company’s shares have gained a massive 260%.
This means Zip Co’s shares are outperforming rival Afterpay Touch Group Ltd (ASX: APT), which is up 162% in 2019.
Why is the Zip Co share price up 260% in 2019?
There have been a number of catalysts for Zip Co’s impressive share price gains in 2019.
One was the company’s strong performance in FY 2019. Over the 12 months the company delivered a 108% lift in transaction volume to $1,128.5 million and a 138% increase in revenue to $84.2 million.
This was driven by an 80% increase in customer numbers to 1.3 million and a 54% jump in partner numbers to 16,000.
Pleasingly, this strong form has continued in FY 2020. During the first quarter Zip Co reported record quarterly transaction volume of $402.1 million and record quarterly revenue of $31 million. This was a 111% and 107% increase, respectively, on the prior corresponding period.
Another catalyst for its strong gain has been the company’s international expansion plans.
In August Zip Co announced the acquisition of PartPay. This gave it an immediate foothold into New Zealand, the UK, the United States and South Africa.
Management estimates that these countries represent a total addressable market of $22 trillion.
Finally, also getting investors excited this year has been the company’s recent agreement with Amazon Australia.
This agreement means Zip Co is Amazon’s first Australian instalment payment option.
Given Amazon’s history of dominating the markets it enters, this could prove to be a major coup for Zip Co in the coming years.
Is it too late to invest?
Although its shares are trading on sky high multiples, I believe it has the potential to generate growth that justifies this premium.
This could make it worth considering a small investment in its shares. However, only if you have a high tolerance for risk.
Interestingly, last month UBS slapped a buy rating and $4.80 price target on Zip Co’s shares. This price target implies potential upside of 22% over the next 12 months.