The Zip Co Ltd (ASX: Z1P) share price is taking flight on Thursday despite there being no announcements from the buy now, pay later (BNPL) company.
In afternoon trade, shares in the instalment payment provider are up 8.3% to $1.765. So far today, more than 11 million Zip shares have changed hands.
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Is a profitable future on the table?
The Zip share price, and the whole BNPL sector for that matter, have long been under pressure for their lack of profitability.
Once upon a time, this was not considered an issue by investors, as BNPL companies touted their blistering rates of growth. However, as the market becomes more mature and saturated, and the pressure of potentially higher interest rates loom, analysts have been less forgiving.
For reference, Zip's trailing twelve-month (TTM) net loss at the end of December 2021 was $419.3 million. This showed an improvement upon the TTM net loss at the end of June 2021, which came in at $658.8 million.
Yet, some analysts were still disappointed by Zip's latest results published on the ASX. Quoting the first-half loss of $214.2 million, the team over at UBS downgraded its outlook on the Zip share price.
However, an announcement from Sezzle Inc (ASX: SZL) today might have investors think that there still could be a path to profitability.
The BNPL company, which is set to be acquired by Zip, revealed it would be reducing its workforce by 20%. This reduction is expected to save Sezzle $10 million in costs per year.
Additionally, Sezzle CEO Charlie Youakim said, "Sezzle has experienced significant growth in its history and is now at an important juncture, as we look to take decisive steps toward profitability and free cash flow."
Experts' stance on the Zip share price
Aside from today, sentiment towards the Zip share price has been rather cold. As my colleague Monica recently covered, fund manager Abrdn Australian recently ditched Zip shares for a position in Pro Medicus Limited (ASX: PME).
Likewise, UBS analysts have a sell rating on the BNPL company. At present, the broker thinks the Zip share price is worth $1 — which would suggest a nearly 43% downside from here.
Finally, Zip shares are down roughly 79% over the past year.
