How much would a $10,000 investment in Zip Co Ltd (ASX: Z1P) shares in March be worth today?
Zip Co has been one of the best performers on the ASX boards over the past few months. Zip is known as the 'younger sibling' of buy now, pay later (BNPL) pioneer Afterpay Ltd (ASX: APT). It's also one of the hottest stocks on the market right now.
In fact, just today the Zip share price is surging again after the company announced a new partnership with American e-commerce giant eBay. Zip shares are up 19.42% at the time of writing to $9.04 a share.
It's certainly been a wild ride for Zip shares in 2020 so far. Throughout the course of this year, Zip has been priced at $3, then $4, then just $1.05 in March, then back to $3, then $4, followed by $6 and $7.
Today's move has taken Zip above $8 and then $9, both for the first time ever. The new all-time high stands at $9.25, which may be exceeded before the day's trading is done.
So, how much would a $10,000 investment in Zip shares back in March be worth today? Well (as we flagged earlier), Zip shares got to a low of $1.05 in the throes of the March share market crash. It wasn't there for long, but it still got to that level. So if you were fortunate enough to sink $10,000 into Zip shares on that day, you would have picked up 9,523 shares with some change left over.
At today's record high, those 9,523 shares would have a market value of $88,087.75 after experiencing a return of 781%. Yikes!
Are Zip shares still a buy today?
Evidently, Zip shares were worth buying pretty much on any day between March and yesterday. But what of today?
Well, on one level, it is conceivable that Zip could have a lot further to climb. Arch-rival Afterpay has a market capitalisation of around $25.2 billion on current prices, whereas Zip is now worth just under $3.5 billion. If Zip can follow Afterpay's lead and execute on its growth strategy, it's possible it can one day rival Afterpay in terms of size and scale.
But that would rely on everything going Zip's way with no room for error if we consider the share price Zip is commanding right now. In my view, the market is assuming BNPL is going to continue to explode as a viable payment option across most areas of consumption in the economy, with Zip as a holder of a major chunk of market share.
This may well happen, but I'm not so bullish. I believe BNPL is here to stay, but I do think it's possible it will have a ceiling of adoption. Long story short, Zip shares are too high right now for me to comfortably make that bet.
But if you're truly sold on Zip's future potential, there may well be still time to jump on this train.
