Zip shares dip into the red despite growth

Zip shares swung into the red despite record numbers for November as concerns mount over competition in the increasingly crowded BNPL segment.

Zip co-founder Larry Diamond. Source: Supplied.

Shares in Zip swung into negative territory on Wednesday despite the buy now, pay later platform posting a record performance in November, with growth across all segments and in each of its markets.

Record transaction volume of $577.1m in November was up 44 per cent on the prior month and more than 100 per cent year on year. While the Australian and New Zealand markets accounted for 55 per cent of the volumes processed in the month, the US market, where it operates as QuadPay, was the big mover, with its volumes surging 65 per cent on October’s numbers and 205 per cent on the year prior.

Customer numbers grew 10 per cent in the month to 5.3 million, while overall transaction numbers jumped 50 per cent to 3.6 million.

On an annualised basis, Zip’s transactions have now hit the $7bn mark, the company said. This compares with the $3.2bn it delivered in fiscal 2020.

Zip CEO Larry Diamond said November was a standout month for the company.

“We are extremely pleased with the Black Friday/Cyber Monday results and more broadly the entire month of November,” he said.

“Through our deep merchant relationships, we were able to secure a number of unique deals & offers which were delivered to our highly engaged customer base….(we) are seeing continued momentum as we close out the calendar year.”

Zip in June announced the acquisition of US-based QuadPay for $403m as it pushed forward with its global expansion ambitions. But some analysts have raised concerns over its prospects in the increasingly crowded segment.

Citi analyst Siraj Ahmed earlier this week told clients that Zip was most at risk from the rising competition between the global platforms.

Commenting on rival Klarna’s total customer numbers in the US hitting 11 million, he called out increasing competition as a threat for the sector but said he expected strong growth in the US in the near term, driven by increasing merchant and consumer adoption.

“The acceleration in Klarna’s customer additions and the launch of PayPal does not seem to be impacting Afterpay and Quadpay’s growth in the US.

“That being said … we see Quadpay (Zip’s US division) as more exposed from a competition perspective given its lack of scale.”

He also questioned whether Zip was too late with its plans to break into the UK.

“Klarna is the market leader in the UK and Afterpay, LayBuy and OpenPay have a head start compared to Zip. While Zip’s global presence is a differentiator compared to some of the smaller players, and the UK represents a large addressable market, given the lack of an early mover advantage, Zip may need to spend more on marketing to grow in the UK.”

Zip’s shares closed down 1.3 per cent at $5.95 on Wednesday.