The Zip Co Ltd (ASX: Z1P) share price has surged more than 69% in the past 3 weeks. Here’s why the company’s shares have been soaring.
What’s fuelling the Zip share price?
Late last month the Zip share price received a boost after the company released an update for the second quarter of FY21.
For the second quarter, Zip boasted a 103% increase in transaction volume to a record of $1.6 billion. As a result, the buy now, pay later (BNPL) company managed to generate an 88% increase in quarterly revenue of $102 million.
According to the update, operations in the United States were the main driver of growth for the second quarter. Zip noted that its QuadPay business delivered a 217% increase in transaction volume of $673.1 million. The company attributed the strong growth to a 180% increase in customer numbers of 3.2 million, whilst also reporting a 655% surge in merchants to 8,400.
Growth was not only limited to the US in the second quarter. Zip also reported a 60% increase in transaction volume in the Australia and New Zealand (ANZ) market of $908.7 million. In addition, customers in the ANZ region grew 39% since the prior corresponding period to 2.5 million.
How has the Zip share price maintained momentum?
In addition to a positive second-quarter update, the recent buzz surrounding the company’s future growth prospects has helped fire up the Zip share price.
An article published by The Australian Financial Review (AFR) last weekend speculated that Zip could be pursuing a second stock market listing in the US. According to the article, Zip was undertaking a US investor roadshow to gain international support for the company.
AFR sources noted that “Zip is considering issuing American Depository Receipts that would mirror shares in the company, trade in the US and give the company greater access to US capital markets.”
The AFR further speculated that the trip was designed to help “bridge a $35 billion valuation gap” between Zip and BNPL juggernaut Afterpay Ltd (ASX: APT).
Foolish takeaway
At the time of writing the Zip share price has stormed another 6.3% higher for the day so far and is currently trading at $10.13. Incorporating today’s bullish price action, Zip has a current market capitalisation of around $5.3 billion.
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Returns as of 6th October 2020
More reading
- ASX 200 up 0.35%: CBA half year update, IAG impresses, Zip shoots higher
- Afterpay and Zip were among the most traded ASX shares last week
- Why Challenger, DEXUS, Emeco, & Zip shares are tumbling lower
- ASX 200 rises 0.6%, Vocus jumps on takeover offer, Afterpay hits new record
- Will LimePay IPO drive ASX BNPL shares even higher?
Nikhil Gangaram 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. 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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