Why did the Zip share price rocket 159% in July?

A man wearing glasses and a white t-shirt pumps his fists in the air looking excited and happy about the rising OBX share price

A man wearing glasses and a white t-shirt pumps his fists in the air looking excited and happy about the rising OBX share price

The Zip Co Ltd (ASX: ZIP) share price was an incredible performer last month.

During the month of July, the buy now pay later (BNPL) provider’s shares rocketed a whopping 159% higher.

What happened to the Zip share price?

There appear to have been a few catalysts for the stellar rise by the Zip share price.

One was news that the company has decided to pay an US$11 million break fee to scrap its merger with rival Sezzle Ltd (ASX: SZL).

The market was never quite sure about the deal and with management expecting that going solo will help it become profitable sooner, the Zip share price unsurprisingly reacted positively to the news.

What else?

Also giving the company’s shares a boost was a rebound in the tech sector.

While the benchmark ASX 200 index rose an impressive 5.7% last month, the S&P ASX All Technology index vastly outperformed this with its gain of 16.2%.

Investors appear to have rotated back into the sector on the belief that tech shares like Zip had been oversold.

And so with the Zip share price still down 74% in 2022 even after last month’s heroics, it wasn’t overly surprising to see the company outperform its peers. Especially with its outlook improving following the Sezzle merger termination.

Quarterly update

Finally, the release of a reasonably solid quarterly update also gave its shares a lift.

For the three months ended 30 June, Zip reported a 27% increase in quarterly revenue over the prior corresponding period to $160.1 million. This was driven by strong results across its consumer operations in the United States, Australia, New Zealand and Rest of World despite growth being tempered by a deterioration in consumer sentiment and adjustments to risk settings.

This means that for the full-year, Zip delivered a 54% increase in revenue to approximately $621.5 million.

Management also revealed further steps that it believes will help reduce its global cost base. This includes closing down Zip Business and the Pocketbook app, as well putting its planned crypto and investment products on the back-burner. It may even exit the UK and other Rest of the World businesses.

All in all, a great month for shareholders. Here’s hoping that August is just as kind to Zip’s shares.

The post Why did the Zip share price rocket 159% in July? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in 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 Scott Phillips.

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