Zip CEO Cynthia Scott
Zip Co’s share price rocketed to almost a 12-month high on Monday after the company revealed that it expects to report pre-tax earnings of up to A$33 million for the six months to the end of December.
In an upbeat trading update filed to the ASX, the buy now pay later company said it grew revenue by 27.9 per cent to $223.6 million in the December quarter compared to the corresponding period in 2023.
Chief executive Cynthia Scott described the result as “outstanding” and reinforced her view that Zip was delivering as a sustainable business.
“Zip delivered an outstanding Group cash EBTDA result for the second quarter, underpinned by a particularly strong seasonal performance in US TTV, the resilience of the ANZ business, improved margins and continued cost discipline,” Scott said.
“Today’s result reinforces that Zip is delivering as a self-sustaining business.”
The disclosure triggered a frenetic bout of trading in the company’s shares, which soared 10.5 cents or 16.5 per cent to close at a 363-day high of 74 cents.
It was the heaviest day of trading in more than 12 months for Zip scrip, with more than 81 million shares changing hands.
Zip’s share price has been under extreme pressure in the last year as the company restructured its global operations and withdrew from non-consumer financing activities.
The scrip fell to a record low of 25 cents in early October as agitated investors questioned whether Zip would be able to refinance more than $1.7 billion worth of debt in 2024.
While that refinancing burden looms as a risk for the company, investors yesterday poured into the stock on expectations that its business might succeed in its quest for bottom line profitability.
Scott yesterday talked up the company’s prospects after highlighting the “operational excellence” of the business.
Most of Zip’s revenue growth in the December quarter was attributable to the US BNPL operation, which expanded its revenue by more than 35 per cent to $116.9 million.
The US business is now larger than Zip’s home market operations in Australia and New Zealand which delivered combined revenue of $106.7 million in the quarter.
Financial information provided in the latest quarterly update appear to magnify the company’s revenue growth compared to the December quarter in the previous year.
The confusion stemmed from the fact that the company subtracted contributions from discontinued business finance operations from the latest quarterly disclosures.