Zip Co Ltd (ASX: ZIP) shares have been a major growth story in 2024. Since trading resumed in January, the ASX 200 stock is up 237%, nudging another 52-week high on Monday.
Shares in the buy now, pay later (BNPL) company are settled at $2.14 apiece, before the open on Wednesday.
With the company set to release its FY24 results next Tuesday, 27 August, what can investors expect from Zip? Management and experts following the company have provided some telling insights throughout the year.
Here's what I've uncovered when gauging what to expect for Zip shares after FY24 earnings.
Zip shares FY24 earnings: What we know so far
This year's rally in Zip shares isn't just speculative mania — the business has experienced a turnaround in 2024.
As we approach its FY24 earnings, several key themes from the past year provide insight.
1. Revenue growth and transaction volumes
Zip shares – and its business performance – have been driven by strong growth in transaction volumes, particularly in international markets.
In the third quarter of FY24, Zip reported a 15% year-on-year increase in total transaction volumes (TTV) to $2.4 billion.
The United States market is leading the charge. TTV was up 43% there compared to Q3 last year.
Furthermore, Zip's physical card "delivered strong customer engagement", growing TTV by 93% year over year in the US.
Management expects TTV and customer growth to continue domestically, noting the "AU business [is] very well-placed for accelerated and profitable growth in FY25 and beyond".
2. Focus on profitability
One of the most significant shifts in Zip's strategy this year has been its pivot from 'growth at all costs' to a focus on profitability. This could be one reason behind Zip shares' performance in 2024.
This strategic shift has been well-received by the market and is likely to be a central theme in the FY24 earnings report, in my view.
In fact, consensus estimates project a profit this year, forecasting earnings per share (EPS) of 4 cents from Zip in FY24, according to CommSec.
In the Q3 update, management also laid out some profit expectations for H2 FY24.
It said it expected cash earnings before interest, tax, depreciation and amortisation (EBITDA) to be "not less than its" first-half result, which was $30.8 million.
Meanwhile, James Nguyen, portfolio manager at Tyndall Asset Management, sees Zip "making close to $100 million of cash [EBITDA]" by midway through next year.
While that's a little in front of its FY24 numbers, we can do the math.
Management expects nothing "less than" the $30.8 million cash EBITDA in the first half, which could potentially be a catalyst for Zip shares.
Say it produces exactly that figure – $30.8 million. This gets us to $61.6 million in cash EBITDA for the year at a minimum.
An additional $40 million over the next six months is required for Zip to hit Nguyen's estimates of $100 million in cash EBITDA.
It may — or may not — be well on track to hit this run rate. We will see next week.
Zip shares snapshot
As Zip prepares to release its FY24 earnings, investors have reason to be optimistic. The company's strong performance this year was driven by revenue growth and a focus on profitability.
The next question is whether the company will deliver next week. Will the trend continue? We shall see.
Zip shares are up more than 520% in the last 12 months.
