Last week, the United States Nasdaq hit a fresh, all-time high. This was driven largely by the tailwinds of its FAANG tech giants. I believe this trend is likely to continue given the changes in consumer behaviour resulting from the coronavirus pandemic. This includes an increase in people globally working and learning from home. As tech continues to outperform the general market, I feel the Zip Co Ltd (ASX: Z1P) share price as well as that of Tyro Payments Ltd (ASX: TYR) could be two to watch this June.
The Zip Co share price
Earlier this month, Zip Co announced the acquisition of QuadPay. The acquisition enables the company to compete directly with buy now, pay later (BNPL) giant Afterpay Ltd (ASX: APT) for the lucrative $5 trillion US retail market. QuadPay is a simple, BNPL product that allows customers to pay for their purchases via 4 interest-free instalments over 6 weeks. The merchant gets paid up front with risk and fraud liability absorbed. QuadPay already has more than 1.5 million customers in the US and 3,500 merchants on board. It delivered an annualised revenue of $70 million for the quarter ending March 2020. This is a transformational acquisition that lifts the status of the Zip Co business to that of a truly global BNPL leader. The company now has operations across Australia, New Zealand, South Africa, the UK and the US.
The US in its sights
To fast track its growth in the US, Zip Co is raising $200 million in funding. The capital is being provided by Susquehanna International Group (SIG). SIG is one of the largest privately-held financial services firms globally. The company will provide Zip Co with $100 million in convertible notes and up to an additional $100 million in warrants. This means Zip Co shares will be progressively diluted as $10 million of notes are converted into shares every six months.
Zip Co updated the market last week on its performance for the month ending 31 May. This update reiterated the strong business environment for the company. Monthly revenue was up 78% year-on-year. Customer numbers increased 63% to 2.1 million. And customer repayment success rates were on par with or higher than pre-COVID-19 rates.
All things considered, Zip Co is undergoing a significant transformation. The company is transitioning from a local BNPL platform to a global BNPL leader. The Zip Co share price has responded nicely following a 70% surge between 29 May and 3 June. So does the Zip Co share price represent a solid, long-term buy? Personally, I would wait for the concerns regarding a second wave of coronavirus in China and the recent market sell-off to subside before jumping in. However, I do believe the company’s acquisition of QuadPay makes Zip Co a top ASX tech share to watch moving forward.
The Tyro Payments share price
Tyro is the fifth largest merchant acquiring bank behind Australia’s big four banks. The company’s customers consist largely of SME businesses operating in the health, hospitality and retail sectors. Tyro represents one of many businesses that have been significantly impacted by lockdown measures. During peak restriction periods across April and May, Tyro’s customer transaction values declined by 38% and 18% respectively, compared with the prior corresponding periods.
Tyro’s transaction volumes for June (up until 12 June), however, have increased by 6%. This indicates early signs of increased economic activity and business slowly returning to ‘normal’. Continued easing of restrictions should see improved transaction values. Particularly as more consumers are able to partake in increased leisure activities. NSW, for example, has increased the amount of customers that pubs, clubs, cafes and restaurants can hold from 20 to 50 in June. WA is also considering allowing stadiums to operate at a limited capacity of approximately 25%. I believe that, for Tyro Payments, the worst is now behind it. As such, it could be an ASX tech share that can outperform over the coming months.
A V-shaped recovery could surface extremely rare opportunities for investors. Check out our free report below for the hidden gems that are often missed by most investors.
3 “Double Down” Stocks To Ride The Bull Market
Motley Fool resident tech stock expert Dr. Anirban Mahanti has stumbled upon three under-the-radar stock picks he believes could be some of the greatest discoveries of his investing career.
He’s so confident in their future prospects that he has issued “double down” buy alerts on each of these three stocks to members of his Motley Fool Extreme Opportunities stock picking service.
*Extreme Opportunities returns as of June 5th 2020
More reading
- Why ASX, Domain, Tyro, & Wesfarmers shares are dropping lower
- Sezzle shares and 2 other ASX techs soared up to 50% in the past 4 weeks
- ASX winners and losers from last week
- The most explosive ASX tech shares you can buy today
- How I would build a balanced portfolio worth $100,000 with 10 ASX shares
Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments and 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.
The post Keep a watch on the Zip Co share price and 1 other ASX tech this June appeared first on Motley Fool Australia.
from Motley Fool Australia https://ift.tt/2MWAzy6
Leave a Reply