scroll

ZIP’s Q1 Report and 50% plunge!

Advanced Search

Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.

Ask a question

The Latest Q&A

Question asked 24/10/2026

ZIP’s Q1 Report and 50% plunge!

Hi MM, In a nutshell, what are your views on ZIP’s Q1 report and the market’s reaction, including given ZIP’s share price had already fallen significantly into the announcement? And what are MM’s plans/intentions in relation to ZIP going forward? Thanks, Darren

Answer

Hi Darren,

For some background to members Zip Co (ZIP) opened down ~50% on Friday morning after delivering a softer-than-expected first quarter, with rising bad debts and a US fraud incident overshadowing otherwise solid revenue and transaction growth. Group revenue increased 17% to $371m, broadly in line with expectations, while total transaction volumes rose 17% to $4.59bn, driven by 24% growth in the US.

However, cash EBTDA increased just 4% to $65m, missing estimates by more than 15%, as net bad debts climbed to 1.97% of transaction volumes, compared with 1.7% in the previous quarter.

An external fraud incident in the US also cost the company approximately $10m and temporarily disrupted transaction growth during July and August, although management says the issue has now been contained.

Importantly, Zip has maintained FY27 cash EBTDA guidance of $340m despite absorbing the fraud-related costs, alongside expectations for US transaction growth of more than 30% and credit losses of 1.5–2% of transaction volumes. Management expects bad debts to improve in the December quarter, while US transaction growth accelerated to 41% in September, suggesting momentum is recovering ahead of the important Black Friday and Christmas trading periods. The company also announced a $50m share buyback for FY27.

While the fraud incident appears to be a one-off, the sharper-than-expected increase in bad debts has understandably raised concerns about credit quality and the sustainability of Zip’s growth.

The unchanged earnings guidance and improving September momentum provide some reassurance, but we will want evidence that credit losses are stabilising and operating margins are recovering to regain confidence in ZIP.

The December quarter now looks particularly important in determining whether today’s selloff represents an opportunity or a warning sign.

When a stock gaps 50% lower, there’s not much we can do, but it was clearly an overreaction, and we suspect Zip may well recover from current levels, hence our preference to retain the stock for now.

chart

Zip Co. Ltd (ZIP)

LAST UPDATED 23/10/2026 10:47

Latest Reports

Weekend report 24/10/2026

Weekend Q&A: We need a weekend after the last few days!

The ASX 200 finished a volatile week, especially at the stock and sector level, with an 8% drop in the materials sector dragging down the broader market by just 0.1% despite almost 60% of the main boards closing higher. However, when we see heavyweight miners South32 (-11%), Sandfire (-10%), BHP Group (-8%), and RIO Tinto (-6%), it was always going to be tough for the index to advance.

Afternoon report 23/10/2026

The Match Out: Banks and retailers keep ASX afloat as miners slide

The ASX spent most of the session trading lower off the back of a weaker session playing out in the US, particularly Tech overnight. Banks and consumer-facing stocks provided a lift, but the modest gain masked a sharp divide across the market.