Analysts upgrade Zip forecasts as US business drives growth
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More news: Zip shares were up 12% to $3.13 in afternoon trading on the ASX after the buy now pay later (BNPL) lender's first-quarter results impressed analysts.
RBC Capital Markets analyst Jack Lynch said Zip's Q1 update was "positive", with the company maintaining strong total transaction volume (TTV) growth, and securing a return to customer growth which has been a "key focal point" for investors.
Zip's Australia and New Zealand business is also showing "pleasing momentum", Lynch noted, with TTV tracking towards management's FY25 aspirational target of a return to growth, and net bad debts moderating over the past four months.
E&P analyst Julian Mulcahy called Zip's Q1 results "a strong set of numbers", driven mainly by the company's US business which continues to notch improvements across most metrics.
E&P upgraded Zip's revenue forecasts by 1% in FY25, 4% in FY26 and 8% in FY27, and its cash EBTDA estimates by 1%, 10% and 19% over the same period. E&P also hiked its blended valuation to $3.77.
What they said: "Zip continues to benefit from increased usage and well controlled loss rates, particularly in the US," Mulcahy said.
"The [December quarter] in the US is shaping up to be a big period for the BNPL players, with major retailers increasingly turning to the channel to drive incremental sales.
"While the ANZ business is relatively mature, profit growth is being driven by enhanced yields as quality improves."
Zip shares rocket on Q1 earnings boost
More news: Zip shares surged in morning trade on the ASX after the buy now pay later lender more than trebled its first-quarter earnings.
Zip was the second best performing ASX 200 company by 11am AEDT, with shares up 12.6% to $3.14.
Citi analysts said they expect consensus upgrades to Zip's total transaction volume (TTV), revenue and cash EBTDA forecasts, given ongoing momentum in the US and its strong net transaction margin (NTM) in Australia and New Zealand.
What they said: "We forecast cash EBTDA of $145 million in FY25, which is 12% ahead of [Visible Alpha] consensus and see upside to our forecasts if US momentum continues," Citi's analysts said.
"However, with net bad debts increasing in the US as Zip focuses on activating new customers, we do see potential for NTM to have peaked."
Zip trebles first-quarter earnings
The news: Buy now pay later lender Zip more than trebled its first-quarter earnings, boosted by double-digit growth in group revenue and total transaction volume (TTV).
The numbers: Zip reported Q1 group cash EBTDA of $31.7 million, up 233.7% compared to the prior corresponding period.
Group revenue rose 18.8% year on year to $239.9 million. Zip's US business saw revenue climb 40.5%, offsetting a 1.5% dip in Australia and New Zealand.
Group TTV grew 22.8% to $2.8 billion, driven by a 39.5% rise in the US, with a 3.1% fall in Australia and New Zealand.
The context: Growth in Zip's US business offset declines in the Australia and New Zealand market, with gains driven by ongoing engagement in higher-margin channels such as Zip's app.
The group also said it repaid all existing corporate debt through an equity placement and share purchase plan, completed during the quarter.
The sources: ASX announcement, Citi research, RBC Capital Markets research
