Zip Co Ltd (ASX: Z1P) shares are locked in a tug of war between bulls and bears following its FY21 results on Wednesday.
On the day of the announcement, the Zip share price tumbled 5.19% to an intraday low of $6.94 in the first few minutes of trade.
Buyers would step up, rallying its shares well into positive territory, up 1.78% to $7.45 by noon. Its gains would fade into the afternoon, closing 2.60% lower at $7.13.
In terms of results, Zip delivered an encouraging performance in FY21, with classic triple digit growth across key operating metrics.
Some key highlights include:
- 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)
- Active customers at 7.3 million, up 247.5% (FY20 2.1 million)
- Active merchants at 51,300, up 109.4% (FY20 24,500)
But upon closer inspection, the company's FY21 loss after tax ballooned to $653 million compared to a $19.94 million loss in FY20. This loss was primarily driven by the adjustment relating to its acquisition of Quadpay.
While Zip shares might remain in a lull state, let's take a look at what might drive the Zip business in FY22.
Zip goes international
Europe and Middle East
In May, Zip announced its plans to acquire the remaining shares in its minority investments Twisto and Spotii.
The acquisition of Twisto provides Zip with the ability to "passport licensing" across Europe to further its regional expansion.
According to the results announcement, the Twisto business is performing well, with annualised revenue of $12 million and total transaction volumes of $230 million. Zip cited a strong product pipeline with a virtual card rollout to drive incremental growth in the region.
The Spotii acquisition was another strategic investment to provide an entry point for further regional expansion across the Gulf Cooperation Council (GCC) region.
Zip believes the region will be supported by strong e-commerce growth in addition to a strong pipeline of enterprise merchants.
Minority Asia investment
More recently, Zip completed a minority investment (25%) in a Philippines based BNPL solution. TendoPay delivers classic core instalment products with a unique repayments solution via salary deduction.
The results stated that the company is in the process of securing debt funding to provide future headroom for growth.
TendoPay has partnered with major brands including Samsung, Havaianas and Western Appliances with a strong pipeline for the next 6 months.
Moving to full ownership in Africa
Zip will purchase the remaining shares in South Africa-based BNPL, Payflex.
Zip initially acquired a 24.7% stake in Payflex in October 2019.
The full ownership of Payflex is viewed as a "strong first-mover advantage with access to broader African markets".
Zip is targeting Africa given its significant population of mobile payment users and underlying fundamentals of rapid smartphone adoption. The company believes its services can help address and support the "underbanked" population.
Zip share price snapshot
The Zip share price has been moving sideways since March this year, despite a 26.3% year-to-date performance.
