Eyes have turned to the Zip Co Ltd (ASX: Z1P) share price which surged 16.95% on Tuesday after announcing a solid set of quarterly results. The results not only highlight the company’s continued momentum across key growth regions but also shed light on its plans for greater international exposure.
While it might have been off to the races with the Zip share price yesterday, what are big brokers thinking?
Citi rates the Zip share price as a buy
Citi was the most bullish broker today, upgrading its rating from neutral to buy. The broker said that the key highlight from the third-quarter update was stronger than expected volume growth.
Zip’s strong quarterly result was driven by QuadPay’s 234% increase in transaction volume. This equated to $762 million, which was 31% higher than Citi’s forecast. With QuadPay’s performance exceeding expectations, the broker upgraded its rating from neutral to buy.
Despite the upgrade, Citi was reserved with its share price target, lowering it from $11.35 to $11.30.
Morgans cautiously optimistic
Morgans ‘add’ rating was unchanged and its target price was lowered from $12.10 to $10.92.
The broker highlighted another strong quarterly performance across all key metrics that increased 10% to 20% on the second quarter. QuadPay was again the standout for the business. Driving a quarter-on-quarter growth of 16%, 7%, and 19% for revenue, transaction volume, and customers.
Morgans reduced earnings per share forecasts for FY21 and FY22 by 2% and 4% on minor adjustments to sales and profit margin forecasts.
UBS is always bearish
UBS has been calling ASX buy now pay later (BNPL) shares as a sell since 2019. Today, the broker reiterated its sell rating while nudging its target price from $6.40 to $6.50.
UBS says that the BNPL sector has benefited from economic stimulus and is wary of its short-term outlook as policy measures are wound back.
Despite QuadPay transaction growth coming out slightly ahead of forecasts, UBS continues to believe that investors should get out of Zip shares.
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Kerry Sun 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 has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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