The Zip Co Ltd (ASX: Z1P) share price was on form in January and surged higher.
In fact, the buy now pay provider’s shares were the best performers on the S&P/ASX 200 Index (ASX: XJO) with a 37.4% gain.
Why did the Zip share price rocket higher in January?
Investors were buying Zip shares in January following the release of its second quarter update.
As you might have guessed from the share price reaction, Zip delivered a very positive update which revealed further strong growth across both its ANZ and US operations.
According to the release, for the three months ended 31 December, Zip delivered a 103% increase in transaction volume to a record of $1.6 billion. From this, the company generated an 88% increase in quarterly revenue to $102 million.
A key driver of this growth was its exceptionally strong performance during the month of December.
During the month, Zip posted monthly transaction volume of $628.4 million. This was a 104% increase over the same period last year and annualises to transaction value of over $7.5 billion.
The majority of this growth came from the key US market.
Zip’s QuadPay business recorded a 217% increase in second quarter transaction volume to $673.1 million. This was underpinned by a 180% lift in customer numbers to 3.2 million and a 655% jump in merchants to 8,400.
Supporting this was its ANZ business, which recorded a 60% increase in transaction value to $908.7 million. ANZ customer numbers grew 39% over the prior corresponding period to 2.5 million and merchants lifted 43% to 30,100.
Another positive that went down well with investors was its bad debts metric in the ANZ market. Its net bad debts decreased from 2.43% to 1.93% over the three months, which was in line with management’s expectations. Monthly arrears in the ANZ market remain steady at 0.95%.
Zip’s Managing Director and CEO, Larry Diamond, was pleased with the quarter and appears confident on the company’s growth trajectory.
He said: “We are extremely pleased to deliver another exceptional set of numbers with the quarter really delivering a significant step change for the Company, confirming our position as one of the fastest growing players in the sector.”
Adding that Zip is “extremely well placed to continue this momentum into 2021 as the global shift away from the broken credit card model continues.”
Zip will be releasing its half year results in the coming weeks and providing more colour on its financials. All eyes will be on the Zip share price when that is released.
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Returns as of 6th October 2020
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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 has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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