How should we play Zip from here?
Hi, I am holding ZIP at a current 30% loss. Wondering your thoughts as to whether it is close to halting its free fall? What is your strategy with this stock in the emerging companies portfolio? Thanks
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Answer
Hi Peter,
Zip recently delivered their quarterly report for the 3-months to March, the shares initially traded higher after the news before yet again falling away to close lower, the stocks undoubtedly in a severe downtrend having peaked above $14 in 2021 – its struggling to hold $1 today!
The $695mn BNPL company saw transaction volumes grow 26% year on year to $2.1b while revenue grew 38% to $159m as the business saw transaction margins pick up. However credit losses still remain an issue, tracking in line with the 2.6% seen in the first half, one of the key reasons the business has been under pressure.
The company is currently targeting breakeven in FY24, this was an average update at best but the stock trading around 3-year lows does feel cheap even for those who aren’t believers, perhaps another Block Inc could rescue the share price. In terms of our position, it is now such a small holding in that portfolio (a little over 1%) which means it has very little impact on performance. We are keeping it there to eventually upweight the holding if bad debts get under control as there is a very good growth story underneath it.
