Zip (ASX:Z1P) CEO: ‘We’d be very, very profitable, but we’re reinvesting for growth’

one hundred dollar notes planted in the ground representing growth asx shares

The S&P/ASX 200 Index (ASX: XJO) is edging lower on Tuesday, currently down 0.12% to 7,443 points. However, it’s a better story for the Zip Co Ltd (ASX: Z1P) share price. At the time of writing, Zip shares are up by 1.79% to $6.24 apiece.

This rise comes amid some interesting developments for Zip. Earlier this year, we covered how Zip was planning to expand into the world of cryptocurrency (and potentially share) trading.

And yet the Zip share price has still been struggling lately, with this buy now, pay later (BNPL) company down roughly 4.4% over the past 12 months.

Perhaps this sluggish share price performance can be blamed on Zip’s lack of profitability. After all, even though Zip reported $403.2 million in revenue for FY2021, along with transaction volumes of $5.8 billion and a cash gross profit of $198 million, it still recorded a net earnings loss of $22.9 million for FY21. That means Zip still lacks a positive price-to-earnings (P/E) ratio.

What the Zip CEO had to say

But seeming lack of profitability isn’t bothering Zip in the slightest. According to recent reporting in The Sydney Morning Herald (SMH), Zip co-founder and CEO Larry Diamond reckons Zip could easily be profitable right now if the company wasn’t ploughing so much cash into more growth.

“If we dropped all of our growth capex, sure, we’d be very, very profitable, but we’re reinvesting for growth,” he told the SMH.

Diamond said Zip is moving in on the cryptocurrency space simply because “you always give customers what they want”.

But it might be a while until we Aussies get it. The company will reportedly be introducing its crypto product into the US markets first, and “within the next year”. This will initially focus on purely investing in digital coins, but Zip does have plans to facilitate customers using the coins to pay for purchases.

However, Zip might have some stiff competition when it does get to offering crypto services here in Australia. As the Fool covered recently, Australia and New Zealand Banking Group Ltd (ASX: ANZ) might also be planning to move into the crypto services space. If it does, it will be joining Commonwealth Bank of Australia (ASX: CBA), which announced its own crypto plans earlier this month. 

But Zip should be used to some healthy competition by now, given how crowded the BNPL sector has become.

At Zip’s latest share price of $6.24, this company has a market capitalisation of $3.56 billion.

The post Zip (ASX:Z1P) CEO: ‘We’d be very, very profitable, but we’re reinvesting for growth’ appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended 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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