Zip (ASX:Z1P) share price sinks despite 150% increase in revenue

Investors are selling off Zip shares despite the company signalling a transformational year that saw it emerge as a global BNPL player.

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The Zip Co Ltd (ASX: Z1P) share price is in the red this morning. This comes after the company released its FY21 full-year results just before market open today.

Zip shares sank 3.96% to $7.03 apiece in early morning trade, before making up some ground to settle at $7.20 at the time of writing.

Let’s take a closer look to see how the buy now, pay later provider performed for the period.

Zip share price slides despite record growth across key metrics

The Zip share price is in reverse regardless of the company’s record result for the 12 months ending 30 June 2021. Here are some of the key highlights:

  • Revenue of $403.2 million, up 150% year on year (FY20 $161 million)
  • Transaction volumes of $5,8 billion, up 178.5% (FY20 $2.1 billion)
  • Transaction numbers of 41.3 million, up 293% (FY20 10.5 million)
  • Active customers at 7.3 million, up 247.5% (FY20 2.1 million)
  • Active merchants at 51,300, up 109.4% (FY20 24,500)
  • Cash gross profit of $198 million, up 147% (FY20 $80.1 million)

What happened in FY21 for Zip?

Investors are selling off Zip shares despite the company signalling a transformational year that saw it emerge as a global BNPL player.

Zip successfully expanded its presence across 12 international markets, including the United States, Canada, the United Kingdom, and Mexico. This led the business to deliver a strong financial performance by capturing new market share.

The US retail market alone is estimated to be worth $5 trillion, representing attractive growth opportunities.

In addition, Zip added new merchant partners onto its network, with notable inclusions such as JB Hi-Fi Limited (ASX: JBH) and Newegg Commerce Inc. It also established key partnerships with payment service providers (Stripe) and e-commerce platforms (BigCommerce).

Lastly, the company brought new BNPL payment innovations (Tap & Zip, Subscriptions, Chrome Extension) to market. This effectively allowed customers to easily access Zip’s integrated platform to make purchases both online and in-store.

What did management say?

Zip managing director and CEO Larry Diamond commented on the milestone achievement:

This has been a truly transformational 12 months as the business has continued to deliver, despite the most exceptional global economic conditions. We fearlessly started the year with a clear strategy for both local growth and global expansion, and pleasingly, 12 months later, we are delivering on this plan, with record growth across all metrics in all jurisdictions, with Zip now operating in 12 countries across five continents.

The trend and shift away from the unfriendly world of credit cards that was the genesis of the Australian business has proven to be a global phenomenon, and Zip continues to accelerate in all our key markets.

What’s instore for Zip in FY22?

Looking ahead, Zip advised that FY22 is expected to be a bumper year. So far, total transaction volume (TTV) is growing 58% in Australia and 240% in the United States year to date compared to FY21. The company noted that global market entries and investments are contributing a meaningful TTV in the new financial year.

Furthermore, Zip continues to onboard more global merchants to drive customer uptake, and essentially, TTV growth. It affirmed a healthy pipeline of enterprise merchants and strategic partnership opportunities.

Whilst COVID-19 has pushed the way businesses transact more towards online, Zip stated it’s well capitalised to take advantage of this. It has allocated significant resources in merchant products to unlock new customer segments and drive referrals to merchant partners.

Zip share price snapshot

Over the past 12 months, the Zip share price has been relatively flat, down 3%. Year to date, the company shares have climbed, up by almost 40%.

Based on the current Zip share price, the company has a market capitalisation of around $4.1 billion.

Should you invest $1,000 in Zip right now?

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended 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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