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Zip Co share price sinks 15% on COVID-19 update

The Zip Co Ltd (ASX: Z1P) share price is on course to end the week with a heavy decline.

The buy now pay later provider’s shares are down 15% to $1.17 despite a positive update this morning.

What did Zip Co announce?

This morning Zip Co revealed that it has not observed any material impact from the COVID-19 outbreak across its business.

And while it does believe there will be implications for various parts of the economy, at this point the Zip Co business continues to perform strongly.

It notes that it has experienced healthy customer growth, transaction volume and has a strong pipeline of enterprise partners in integration or in advanced discussions.

The release also reveals that Zip Co generated $30 million in revenue during January and February, which was 98% higher than the same period in 2019. Furthermore, core transaction volume quarter-to date is currently $403 million, up 85% on the prior corresponding period.


The company advised: “Whilst it’s inevitable there will be a softening in demand across certain segments, such as bricks and mortar retail, discretionary spend categories, travel and tourism, we expect continued strong demand for online purchases, bill payments, everyday spend and health – where Zip continues to increase its penetration.”

Management also stressed that its balance sheet remains strong following its recent $62 million equity placement.

It has over $1.1 billion in committed funding through its various securitisation vehicles, with all covenants solely relating to the performance of receivables. Pleasingly, Zip remains well inside all covenants, and the receivables continue to perform very well and in line with management expectations. Net bad debts were 1.79% in February.

Zip Chief Executive Officer, Larry Diamond said: “Zip is a digital-first business and we are well prepared for the operational impacts resulting from COVID-19, with staff working remotely and without any effect on our ability to support customers and retail partners. The business continues to perform in line with expectations, and while we haven’t seen any material impact on the business we are taking a rational and considered approach to our go-forward strategy. We will adapt and take decisive action if required.”

Elsewhere in the industry, the Afterpay Ltd (ASX: APT) share price is down 11% at the time of writing. It has yet to advise whether it is being impacted by the outbreak.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. 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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