Zip shares tumble despite narrowing full-year loss
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The news: Shares in Zip have tumbled in early trading despite the buy now pay later lender reporting a turnaround in its underlying full-year profit.
The numbers: The company reported a statutory net loss of $0.45 million, down from a $364 million loss a year ago. However, underlying profit came in at $5.7 million, a sharp turnaround from the $329.9 million loss a year ago. Active customer numbers dipped 2.9% to 6 million and its bad debts were at 1.3% of total transaction volume.
Zip shares were down nearly 8% at $2.10 on the ASX, but have nearly trebled so far in 2024.
The context: The lender said its strong annual performance was driven by its US business, which delivered record earnings.
The company last month raised $267 million through a share sale to repay debt and support future growth after simplifying its balance sheet and pushing for growth in the US market.
Zip is targeting growing cash earnings by 1% to 2% over the next two years and aims to lift its operating margin to as high as 17% from 7.9%.
RBC Capital Markets analyst Jack Lynch said the company delivered strong cash earnings at the top end of the range even as a bad debts spike in the Australia business looked to have moderated.
RBC has a share price target of $1.90 and an 'outperform' rating on the stock.
What they said: “We believe Zip's outlook is incrementally positive with medium-term targets refined to two years, upward revision of certain two-year targets (cash next 12 months), and cash earnings implying a beat to consensus expectations,” Lynch said in a note.
The sources: ASX announcement, RBC Research
