The Zip Co Ltd (ASX: Z1P) share price has been on a rollercoaster ride in 2020. The buy now, pay later (BNPL) provider’s shares are down 4.52% to $3.38 per share. However, that doesn’t tell the full story.
Zip shares plummeted to a new 52-week low of just $1.05 per share on 19 March. Investors were spooked by the potential impact of COVID-19 on discretionary spending levels here in Australia.
Many of Zip’s sales come from discretionary spending, whether that be in retail, travel, electronics or a number of others. However, the Zip share price has been surging back to life and is up 221.90% from its 52-week low. That means a $10,000 investment in Zip could be worth as much as $32,190 in less than 2 months.
So, is it a good time to invest in Zip, or have you missed the boat on the Afterpay Ltd (ASX: APT) competitor?
Is the Zip share price in the buy zone?
Zip shares have had quite the resurgence in April and May. A strong quarterly update followed by a solid April trading update have been key to the strong share price rebound. In fact, the BNPL sector has been doing well with consumers continuing to spend and Afterpay shares also rocketing higher.
Zip offers point-of-sale credit and digital payment services to consumers and merchants. The group counts big names like Amazon, Chemist Warehouse, Bunnings and Big W amongst its key clients. Customers were still spending big and using Zip’s services despite COVID-19 concerns. Times are tough, but many Aussies are still looking to fix up their homes or enjoy some retail therapy amid the economic shutdown.
That spending underpinned the Zip share price growth in April and May. In fact, Zip reported an 81% year on year increase in monthly revenue in April to $15.1 million. On top of that, Zip added some 70,000 customers during April, taking total customer numbers to 2 million, a 66% increase year-on-year. Merchant numbers increased to 23,100, a 50% increase from April FY19.
Foolish takeaway
The Zip share price has been rebounding strongly despite market panic in February. I think the recent trading updates show that there is still growth potential in the years ahead. We could be looking back at $3.38 per share as an absolute bargain price for Zip shares in no time…
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More reading
- Top brokers name 3 ASX 200 shares to buy right now
- Why Afterpay, Flight Centre, Mesoblast, & Sezzle shares are dropping lower
- Safe dividend stocks to buy today for the COVID-19 world
- Short sellers are going after Afterpay’s rivals and these ASX shares
- 3 top-notch ASX shares on my May watchlist
Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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