Why did Zip shares jump 42% in November?

Zip shares delivered strong returns for investors last month. But why?

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Zip Co Ltd (ASX: ZIP) shares look to have run out of steam on Friday.

In afternoon trade, the buy now pay later provider's shares are down 1.2% to 40 cents.

However, shareholders won't be too disappointed given how well its shares performed last month.

Over the course of November, Zip's shares delivered a return of 42%.

Why did Zip shares take off last month?

There were a few reasons for last month's heroics.

The first was the release of a stronger-than-expected update from rival Block Inc. (ASX: SQ2) early in the month.

Commenting specifically on the buy now pay later part of its business, the company said:

Turning to our BNPL platform, which contributed $94 million of gross profit to each of Square and Cash App in the third quarter. GMV from our BNPL platform was $6.7 billion in the third quarter, an increase of 24% year over year. Losses on consumer receivables were 0.84% of GMV, an improvement quarter over quarter and year over year.

This gave investor sentiment in the industry a major boost, resulting in strong gains being recorded across the board.

What else?

Also giving Zip shares a boost was the release of its own update in November.

At its annual general meeting, management spoke positively about its profitability goals. And while the initial reaction was subdued, its shares started to climb in the days that followed.

They were also given another lift late in the month when Financial Services Minister Stephen Jones revealed that any potential changes to buy now pay later regulations would be pushed back until next year.

Can its shares keep rising?

The broker community is sitting on the fence when it comes to Zip's shares. Both UBS and Ord Minnett have the equivalent of hold ratings at present.

And while Ord Minnett sees scope for the company's shares to rise to 42 cents, the team at UBS believes that 36 cents is fair value.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Block and Zip Co. The Motley Fool Australia has positions in and has recommended Block. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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