The Zip Co Ltd (ASX: Z1P) share price is back in focus on Friday morning. Recent insights shared by a leading broker have cast doubts on the rebranding of Quadpay in the United States.
Shares in the buy now, pay later (BNPL) company slipped 2.48% yesterday. At the end of the session, the Zip share price stood at $6.69. However, shares are bouncing back in early trade today, swapping hands for $6.89 at the time of writing.
It has been a testing month for Zip investors, with the value of their holdings falling 14% over the past 30 days.
Here's a look at what analysts think of the latest change in tack for Zip's US operations.
Coincidence or consequence?
In July, Zip released a quarterly update noting its plans to rebrand its Quadpay business as Zip in August. The company initially acquired Quadpay in September 2020. Since then, the Quadpay business has been a growth engine for the BNPL competitor.
To illustrate the importance of its US operations, in the last financial year, the company's Australia and New Zealand operations grew by 40% in terms of revenue. Meanwhile, Zip's US segment experienced a 269% increase in pro-forma revenue year-over-year.
Understandably, shareholders and analysts would be keeping a close eye on how Zip's US operations are tracking. This brings us to an analysis conducted by Citi, putting the Zip share price in focus on Friday.
According to Citi, since Quadpay has been rebranded to Zip web traffic and app downloads have slumped. While app downloads have been impacted to a lesser extent, traffic to the website has declined rapidly. Taking a look for ourselves, Similarweb shows web traffic for Quadpay dropping from 3.75 million in July to 2.04 million in August.
Although, the analysts considered that perhaps transaction volume is not significantly impacted if app usage remains elevated.
In its note to clients, Citi analysts wrote:
App downloads seem to be less impacted, however total app downloads declined for the 5th consecutive month which points to downside risks to our customer growth forecasts.
In our view, increasing app usage has been a key driver of Zip's TTV growth in the US in recent quarters – app usage has remained stable in recent months which suggests that overall transaction volumes may not be impacted.
Potential risk to Zip share price
The analysts concluded that the decline in traffic following its rebrand presents a risk. Specifically, the broker highlighted downside risk to its forecasts for its first-half result in FY2022.
Unfortunately, the mounting concern comes at an already tumultuous time for the Zip share price as competition heats up. Yesterday, we covered Paypal Holdings Inc (NASDAQ: PYPL) entrance into Japan's BNPL market. The payments company acquired Paidy for US$2.7 billion to get its foot in the door of another geography.
On top of this, US-based Affirm Holdings Inc (NASDAQ: AFRM) has been making moves, being the first BNPL provider to partner with Amazon.com Inc (NASDAQ: AMZN).
