The Zip (ASX:Z1P) share price soars as Citigroup says 1Q update to surprise

The Zip Co Ltd (ASX: Z1P) share price outperformed after a top broker predicted a better than expected quarterly update from management.

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Zip Co share price

The Zip Co Ltd (ASX: Z1P) share price outperformed after a top broker predicted a better than expected quarterly update from management.

The Z1P share price jumped 5.7% to $7.99 on Monday when the S&P/ASX 200 Index (Index:^AXJO) recorded a 0.5% gain.

Zip’s strong showing also left its rivals in the dust. The Afterpay Ltd (ASX: APT) share price gained 2.8% to $92 while the Splitit Ltd (ASX: SPT) share price added 4.6% to $1.59.

Near-term catalyst for the Zip share price

Investors got excited about the Zip share price after Citigroup tipped further upside for the stock at the company’s upcoming September quarter update as its US subsidiary Quadpay could add to the sizzle.

“Zip’s website visits accelerated +11% mom [month-on-month] in September, while app downloads (Android only) in Australia increased +33% mom,” said the broker.

“Our analysis of Similar web data points to a record month for Quadpay on the back of adding GameStop, which should also be positive for [average] order values.”

Z1P share price getting boost from US

The Quadpay website visits increased by 55% in September compared to the same month last year.  Its Android app downloads also jumped by increased 54% to 166,000.

The addition of Gamestop and the launch of new Xbox and PS consoles is a key drive, according to Citi.

“Further, the game console orders should also increase average order value given the higher ticket price but note that there will be a lagged impact on GMV given customers need to only pay 25% upfront, with the balance paid post shipping (in November),” added Citi.

Afterpay website visits decline

Investors have a habit of comparing the Zip share price with Afterpay. The latter could hit a soft patch. While Citi estimated that Afterpay’s website visits from Australia and New Zealand increased 32% over the year, website visits dropped 11% mom.

However, this doesn’t bother Citi much. The softness in September is due to Afterpay’s major sales event in August.

In fact, the broker thinks Afterpay could also beat expectations thanks to improving momentum in its US operations last month. Its US website visits improved 7% mom – taking its first quarter website hits to 246% yoy – while Android app downloads jumped 25% to 438,000.

If there’s one area investors should pay attention to, it’s merchant switching. Citi noted that Afterpay stole Deckers Brands from Quadpay, while another rival, Klarna, won Haus Labs from Afterpay.

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