It wasn’t just Afterpay Ltd (ASX: APT) that was rocketing higher last month in the buy now pay later industry. One of its key rivals also surged higher.
In fact, the Zip Co Ltd (ASX: Z1P) share price was an even stronger performer. It finished the month with an impressive 57% gain.
Why did the Zip Co share price rocket higher in May?
Investors were buying Zip Co’s shares last month after it released a trading update for the month of April. That update revealed that the buy now pay later provider’s strong growth has continued during the pandemic.
For the month ending 30 April, Zip Co delivered an 81% increase in monthly revenue to $15.1 million. This was driven by an 86% lift in monthly transaction volume to $181.6 million and a 70,000 increase in customer number to 2 million.
The latter means the company’s customer numbers have grown 66% since the same period a year earlier. This was supported by a 50% year on year increase in merchant numbers to 23,100.
Another positive was its net bad debts, which came in at 1.99%. Management revealed that this is significantly outperforming the market. In a similar vein, Zip Co’s monthly arrears remained flat at 1.57%. This appears to have convinced the market that there will not be a spike in bad debts during the current crisis.
The company’s Managing Director and CEO, Larry Diamond, was rightfully pleased with its performance.
He said: “April was another very strong month for Zip, and in particular when considering the shutdown of a large portion of the economy. Our product differentiation and penetration into purchases for online, the home, and everyday spend categories, delivered robust transaction volume. Our revenue model has continued to deliver a strong result in the face of a challenging economic environment for retail more generally.”
Will there be more of the same for Zip Co shares in June?
It looks set to be an eventful month for the company in June.
This morning Zip Co requested a trading halt while it undertakes a capital raising to fund a proposed acquisition.
No details have been released regarding the acquisition, but if the market sees value in it then I wouldn’t be surprised to see its shares charge higher in June. But we’ll have to wait and see tomorrow or Wednesday when the company reveals all.
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James Mickleboro 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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