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Highlights
- Zip Co saw a remarkable 363% surge in its share price in 2024, making it the best performer on the ASX 200.
- The company reported a 28.2% revenue increase and a 243.2% jump in cash earnings for FY 2024, despite challenges like higher interest rates.
- UBS analysts have set a $3.65 price target, suggesting 20% potential upside from current levels.
Zip Co Ltd (ASX:ZIP), the Australian buy-now-pay-later (BNPL) provider, emerged as the standout performer on the ASX 200 in 2024, with an astounding 363% increase in share price. This meteoric rise has placed Zip at the forefront of investors’ minds, marking the stock as a major success story for the year.
How Did Zip Achieve This?
At the start of 2024, Zip's future seemed uncertain. Like many BNPL providers, Zip was facing a tough environment with increasing competition and rising interest rates, which had caused skepticism among investors. In late 2023, BNPL player Openpay went into voluntary liquidation, and Block Inc. (ASX:SQ2) saw its stock price drop below the cost it paid to acquire Afterpay, another key player in the sector.
Yet, Zip defied the odds. While the broader BNPL industry struggled, Zip managed to deliver impressive results, proving its business model could thrive despite the external challenges.
Strong FY 2024 Performance
In its FY 2024 results, Zip reported a 28.2% increase in revenue, reaching $868 million, and a 243.2% growth in cash earnings before tax, depreciation, and amortisation (EBTDA) to $69 million.
Zip’s Total Transaction Volume (TTV) increased by 14% to $10.1 billion, while its revenue margin improved by 96 basis points to 8.7%. Furthermore, Zip maintained healthy growth in its customer base, now serving 6 million active customers.
Notably, despite the ongoing cost of living crisis and higher interest rates, Zip managed to reduce its net bad debts by 18 basis points to 1.7% of TTV, underscoring the resilience of its business model.
CEO's Comments on Performance
CEO Cynthia Scott was enthusiastic about the results, stating:
"This has been an outstanding year for Zip, with the company executing against all of its strategic priorities and reinforcing its position as a strong, simplified, and profitable business."
Scott further highlighted Zip's success in the US market, where the company achieved record cash EBTDA, TTV, and revenue. Meanwhile, Zip's ANZ business also set a record cash EBTDA result of $33 million, driven by margin expansion.
What's Next for Zip?
Looking forward, Zip’s positive momentum continues to attract analysts. UBS has issued a buy rating for Zip’s shares with a price target of $3.65, which suggests a 20% upside from its current levels.
