The payments company is a bull market stock, and has experienced eye watering volatility over the years, from under $1 up to $14 in 2021 and back down to 30c. It now trades ~$2 having pulled back from $3.60. This is not for the faint hearted, and while it’s up from the recent lows of ~$1, the recent operational performance has underpinned the move, with momentum in the 3rd quarter building on prior periods.
Growth in their US business is the key, and they saw Total Transaction Value (TTV) and revenue up 40.2% and 44.1% respectively year on year. While the US business is coming off a smaller base, so the growth numbers are a lot more impressive, they still managed to grow TTV in ANZ at 12.6% year on year; solid rather than spectacular, though this is not the reason to own the stock.
Bad debts have been a concern in the past, though they have also remained well contained, down to 1.6% of TTV with US loss rates forecast to be in the 1.3-1.5% range. They reconfirmed their two-year targets at the last quarterly update, while also increasing their FY25 earnings (Ebitda) guidance to at least $A153m, up from $A147m. To put this into context , they booked $69m in FY24.
- This is a proper growth company, with consensus expectations for revenue growth to compound at 20% for the next 3-years, with greater scale driving better margins. If they achieve this level of growth, we suspect the shares will be trading well north of $3.
MM is now bullish on Zip ~$2
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