The Zip Co Ltd (ASX: Z1P) share price has returned from its trading halt and rocketed higher this afternoon.

At one stage the payments company’s shares were up as much as 44% to $5.40.

They have since pulled back a touch, but are still up a sizeable 36.5% to $5.12.

Why is the Zip Co share price rocketing higher?

Investors have been fighting to get hold of the shares of the Afterpay Ltd (ASX: APT) rival after it revealed that it has entered into an agreement to acquire the remaining shares in New York-based buy now pay later provider QuadPay.

According to the release, the company has agreed an all-scrip deal. This will see QuadPay stockholders entitled to receive up to a maximum of approximately 119 million Zip shares, which will represent the equivalent of 23.3% of the issued share capital of Zip at completion.

This implies an enterprise value of approximately US$269 million or A$403 million, but will be accretive for Zip on both a total transactions volume (TTV) and revenue basis.

Management notes that the QuadPay acquisition builds on its global strategy and believes it is a compelling investment proposition for shareholders.

This is because QuadPay is one of the leading buy now pay later platforms in the United States – the world’s largest retail market, which is estimated to be worth US$5 trillion per year.

The company also notes that this acquisition will turn Zip into one of the world’s leading global buy now pay later players. 

If the acquisition completes, the company will have operations across the world in five countries (Australia, New Zealand, United States, United Kingdom, and South Africa). It will also have combined annualised TTV of $3 billion, annualised revenue of $250 million, 3.5 million customers, and 26,200 merchants.

Convertibles notes.

In addition to this, the company has entered into an agreement with CVI Investments, Inc., an affiliate of Susquehanna International, to raise up to $200 million by way of the issue of convertible notes and the exercise of warrants.

The convertible notes have an initial conversion price of $5.5328, which is a 47.7% premium to its last close price.

These funds will be used to help accelerate Zip’s growth in the United States and other core markets.

Zip CEO and Co-Founder, Larry Diamond commented: “We are delighted and excited to have the QuadPay team join the Zip family. As a strategic investor in the business, we have spent considerable time with the founders, Adam and Brad, and share a united vision of disrupting the outdated credit card with a digital, and fairer alternative.”

“The US is a critical part of our global strategy and vital as merchants increasingly look for a global payments solution. We have been impressed by QuadPay’s continued innovation. They were first to market with a virtual card solution in the BNPL space and have continued to evolve and innovate their offering. We look forward to this exciting new chapter in the Zip journey,” he added.

Shareholders will be able to vote on the acquisition and convertible notes at an extraordinary general meeting. Should they be given the go-ahead, management expects to complete both in the first quarter of FY 2021.

More reading

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• Why the Zip Co share price rocketed 57% higher in May
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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 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.

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Is the CSL Limited (ASX: CSL) share price a buy?

In the initial stages of the coronavirus share market sell off the CSL share price remained strong in Australian dollar terms as the US dollar strengthened.

But over the past week the CSL share price has actually fallen by 7% despite the share market strengthening.

CSL was seen as a bastion of safety with its healthcare services. It’s the number one in global plasma therapies and the number two for flu vaccines. Those are essential services. 

That’s why the CSL share price didn’t drop anywhere near as much as shares like National Australia Bank Ltd (ASX: NAB) or Qantas Airways Limited (ASX: QAN).

But we saw the Australian dollar weaken to as low as $0.57 compared to the US dollar during March 2020. The Aussie dollar has since strengthened to $0.68. That makes a big difference when looking at CSL’s earnings which are reported (and a large portion is generated) in US dollars.

CSL recently announced new debt facilities to strengthen its debt profile.

Is it a good time to buy CSL at this share price?

The healthcare giant is aiming for a net profit in FY20 of between US$2.11 billion to US$2.17 billion. This would be another solid result after years of impressive growth already. The company continues to invest heavily into research and development to ensure that it continues to produce the new needed products for people. New treatments could make a big difference to the world. It’s one of many businesses looking to find a coronavirus treatment. 

I think it makes a lot of sense to invest in CSL when the Australian dollar is so strong. It’s certainly not cheap, so I wouldn’t want to buy a lot. But I’d be willing to be some today.

More reading

• Why I would buy these ASX 200 blue chip shares in June
• In your 50s? Here are the 2 best ASX 200 shares to buy now
• Why Austal, CSL, Fortescue, & Star shares are charging higher today
• 5 ASX 200 winners and 3 losers from last week
• ASX 200 Weekly Wrap: Surging bank shares push ASX toward 6,000

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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The S&P/ASX 200 Index (ASX: XJO) is relatively flat today after a week of solid gains – up 0.21% at the time of writing to 5,831.3 points. If you’ve been watching the progress of the ASX 200 over the last month, you might be getting excited. That elusive 6,000-point threshold seems tantalisingly close at these levels.

As is normally the case, our market rally is being mirrored over in the United States of America. Since 23 March 2020, the S&P 500 Index (which measures the performance of the 500 largest companies in America) has rallied over 36%. The ASX 200 has rallied by over 28% since the same day (coincidentally the market bottom for both indexes).

An ‘unloved but welcome’ share market rally?

But according to MarketWatch, analysts from US investment banking giant, Goldman Sachs are calling this an “unloved but welcome” share market rally. Goldman’s analysts have set a ‘target’ for the S&P 500 of 3,000 points by the end of the year.

This morning (our time), the S&P 500 closed at 3,055.73 points. This means Goldman is assuming the markets stay more or less flat at these levels for the rest of the year.

So how does Goldman Sachs justify this semi-bearish target? The analysts describe the recent rally we’ve just experienced as a “remarkable journey”. But it’s also one they see as most likely stopping due to “numerous medical, economic and political risks dot the investment landscape”.

They postulate that “in the near-term, the index could move to 3,200 but any bumps in the road to economic reopening or further political risks could send the index to 2,750”.

As such, Goldman’s analysts are predicting that the US share market rally has already priced in a strong economic recovery.  Thus, the fulfilment of this prediction will not result in markedly higher share prices, rather providing “validation” of the current levels.

What would this mean for ASX shares?

As I alluded to earlier, the ASX 200 is more connected to the S&P 500 and the broader US markets than many investors realise. If Goldman Sachs’ predictions turn out to be accurate, I think it’s a reasonable conclusion to make that the ASX 200 will also be relatively flat for the rest of the year, as most of the concerns Goldman has can be translated effectively to the ASX 200 as well.

But, of course, successful investing isn’t about trying to predict where the markets will be in six month’s time in my view. It’s about finding high-quality companies at great prices that you can hold as long-term investments. Whether or not Goldman Sachs’ analysis is a means to this end is up to you!

More reading

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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