Up 11% in a month: Can the Zip (ASX:Z1P) share price keep rising?

Zip shares have risen 11% over the last month. Is it an opportunity?

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The Zip Co Ltd (ASX: Z1P) share price has gone up by 11% over the last month.

Could the buy now, pay later company be an opportunity for investors to consider? Can Zip shares keep rising?

Zip recently released its update for the first three months of FY22 to 30 September 2022.

Zip FY22 first quarter

The company said that its quarterly revenue had increased by 89% year on year to $136.8 million. This came from quarterly transaction volume growth of 101% to $1.9 billion. Transaction numbers grew even faster, rising by 177% to 14.7 million.

Looking at the US, it was responsible for around half of the overall revenue, generating $67.1 million of revenue. In US dollar terms, Zip US revenue increased 182% to US$49.3 million and 6% quarter on quarter. Transaction volume rose 204% to US$702.1 million.

Customer and merchant numbers both continue to grow at a high double digit rate. The number of customers increased 82% to 8 million. Merchants using Zip increased 71% to 55,200.

The company said that it had maintained “market-leading” buy now, pay later margins with revenue as a percentage of total transaction value (TTV) at 7%.

However, in terms of arrears, Zip ANZ saw an increase. At 30 September 2020, it had arears of 0.91%. This had risen to 1.87% as at 30 September 2021.

Other highlights

Zip said that it successfully completed a global rebrand to the new look Zip in six countries with the US changing from Quadpay to Zip. A brand launch campaign is underway in the US from the middle of October.

The buy now, pay later business also recently announced that it has entered into an agreement with Microsoft to integrate Zip’s instalment payment technology natively into the shopping experience within the Microsoft Edge web browser.

Setting the scene for international growth is another area of focus for Zip. It described its move into India as a exciting, with an investment in the business called ZestMoney, one of the largest and fastest-growing BNPL platforms in India with over 11 million registered users, more than 10,000 online merchants and a presence in more than 75,000 physical stores.

Zip managing director and CEO Larry Diamond said:

Q2 has started strong led by the resurgence in-store. Zip’s ubiquitous payments technology and the lead up to the strongest seasonal quarter of the year, with Black Friday, Cyber Monday and Christmas promotional sales in November and December.

Is the Zip share price worth pursuing?

It’s a bit of a mixed bag. Morgans thinks Zip shares are worth buying, with a price target of $8.56. Citi is neutral on the business, with a price target of $7.40.

However, the brokers at Macquarie Group Ltd (ASX: MQG) and UBS both feel that Zip shares are overvalued, with both of them having sell ratings.

Macquarie notes the lower growth and UBS thinks that its active customer growth could slow down over the coming quarters.

Macquarie has a price target of $5.70, whilst UBS has a price target of $5.40.

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

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Motley Fool contributor Tristan Harrison 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 owns shares of and has recommended Macquarie Group Limited. 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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