The Zip Co Ltd (ASX: Z1P) share price could go through a significant recovery in the next 12 months according to one broker.
Since the start of the year, the Zip share price has sunk 30%. But the last six months has seen a very big drop – down just over 60%.
However, whilst some investors have gone really negative on the company, there are a few analysts that believe the buy now, pay later business can still recover a lot of lost ground this year.
Zip share price target
Ord Minnett has a price target on the company's shares of $6. That suggests a potential rise of the business of around 100% over the next year.
The broker came to its price target – which was a reduction from the previous target of $9.50 – after seeing Zip's latest update.
Ord Minnett's price target reduction came about with the shift in valuation changes for tech shares as well as expecting that over the next few years Zip is going to make bigger losses than previously expected.
Despite those concerns, the buy now, pay later (BNPL) business continues to grow.
Latest quarter
Zip reported a record group quarterly revenue number of $167.4 million, up 58% year on year. Transaction volumes increased 53% to $2.6 billion. Customer numbers increased by 57% to 9.9 million whilst merchant numbers rose 110% to 81,800.
On top of that, it achieved its target of more than $50 million transaction volume per month from expansion markets in both November and December. Those expansion markets include Canada, Mexico, Poland, the Czech Republic, UAE and Saudi Arabia.
It has signed on numerous merchants over the years, with some of the latest being Footlocker, Nespresso, Virgin Australia and Under Armour.
In Australia and New Zealand, the net bad debts increased from 2.44% at 30 September 2021 to 2.83% at 31 December 2021.
Sezzle Inc (ASX: SZL) acquisition?
A couple of weeks ago, Zip confirmed that it's in discussions with BNPL competitor Sezzle about potentially buying the US-based business, though the talks are preliminary.
The Zip board said that it:
…remains committed to ensuring any transaction delivers value to shareholders and will always be disciplined in its assessment of potential opportunities. It will only pursue transformational transactions that help accelerate the delivery of Zip's broader strategic objectives such as enhanced scale in core markets, improved customer and merchant propositions and a faster path to profitability through significant synergy opportunities.
Zip share price snapshot
After the heavy decline in recent months, Zip's market capitalisation is now $1.76 billion.
