Why did the Zip share price just crash 20%?

Up 275% in a year, Zip shares are getting smashed on Thursday. But why?

| More on:
A wide-eyed man peers out from a small gap in his black zipped jumper conveying fear over the weak Zip share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Zip Co Ltd (ASX: ZIP) share price is taking a tumble today.

Shares in the S&P/ASX 200 Index (ASX: XJO) buy now, pay later (BNPL) stock closed yesterday trading for $3.27. In morning trade on Thursday, shares are changing hands for $2.63 apiece, down 19.57%.

For some context, the ASX 200 is up 0.2% at this same time.

The big move down follows the release of Zip's second quarter results for the three months to 31 December (2Q FY 2025).

Read on for the highlights.

Sliding margins put Zip share price under pressure

The Zip share price is falling hard today despite the company delivering strong growth across most key financial metrics, demonstrating investors' high expectations for the high-flying stock.

Zip reported cash earnings before taxes, depreciation and amortisation (EBTDA) of $35.3 million. That's an increase of 50.2% from 2Q FY 2024, though it's lower than some analysts have been forecasting.

Total Transaction Volume (TTV) came in at a record $3.4 billion, up 24.8% year on year.

Revenue also grew strongly, up 20.5% to $269.4 million.

However, the Zip share price looks to be catching headwinds today, with revenue margin slipping to 7.9% from 8.2% reported in 2Q FY 2024. Cash transaction margins also dipped slightly to 3.6% from 3.5% in the prior corresponding period.

In a positive sign, bad debts were down year on year, with Zip reporting net bad debts represented approximately 1.5% of TTV. That's down from 1.7% of TTV in 2Q FY 2024.

The ASX 200 BNPL stock also saw its active customers grow to 6.3 million, up 1.5% year on year. And merchants on its platforms increased by 7.6% from the prior year to 81,900.

What did management say?

Commenting on the results that have failed to lift the Zip share price today, CEO Cynthia Scott said, "Zip continued to deliver strong growth and momentum in the second quarter, achieving a record set of results…"

Scott highlighted the strong growth of Zip's US business:

Our strong performance was driven by outstanding US growth, with year on year TTV and revenue growth of 38.3% and 41.0% respectively, driven by an exceptional holiday trading period which included the single largest trading day and month in Zip's history.

As for Zips Australia and New Zealand business, Scott said:

ANZ TTV returned to growth year on year, driven by a strong increase in transaction numbers. Our focus on margin improvement and the rollout of Zip Plus has delivered an increase in the Australian portfolio yield, up 110 basis points year on year to 18.6%, another strong result in a high interest rate environment.

With today's big intraday slide factored in, the Zip share price remains up a whopping 253% since this time last year.

Motley Fool contributor Bernd Struben 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 Zip Co. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Earnings Results

A man and a woman sit in front of a laptop looking fascinated and captivated.
Financial Shares

5 ASX 200 financial stocks reporting next week

Earnings season is underway...

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Earnings Results

Why is this leading ASX 200 REIT under pressure on Friday?

Investors are pressuring the ASX 200 REIT on Friday. Let’s find out why.

Read more »

A happy young couple celebrate a win by jumping high above their new sofa.
Earnings Results

Nick Scali shares jump 12% on better than expected half year results

How did the furniture retailer perform during the first half? Here's what you need to know.

Read more »

Oil worker using a smartphone in front of an oil rig.
Earnings Results

ASX 200 energy stock tumbles despite 50% dividend boost

The ASX 200 energy stock is under heavy selling pressure on Thursday. But why?

Read more »

Earnings Results

This $27 billion ASX 200 share is jumping on strong quarterly results

Investors are cheering on this giant's quarterly update this morning.

Read more »

Business people discussing project on digital tablet.
Real Estate Shares

REA shares sink after CEO exit overshadows half-year profit beat

A strong result has been offset by news that the company's CEO is stepping down.

Read more »

Three smiling corporate people examine a model of a new building complex.
Earnings Results

2 ASX 300 real estate shares charging higher on half-year results

Did these shares deliver strong results? Let's find out.

Read more »

Woman on the phone at a hardware store.
Industrials Shares

Why this $18 billion ASX 200 stock is lifting off on Wednesday

The ASX 200 company is racing ahead of the benchmark.

Read more »