Zip Money Afterpay post

Alternative credit platforms – Zip Co & Afterpay – battle it out

Stock

Afterpay Touch (APT) $13.50 & Zip Co (Z1P) $1.00 as at 19/07/2018

Event

Zip released their June Quarter report today which seemed impressive, but saw the stock fall ~4% early in the day and struggle to recover. Zip passed an important milestone as the first time Zip was cash flow breakeven – adding $0.7m over the quarter. Funding costs were also seen to be falling, along with operating costs relative to the loan book helped significantly by the growth in transaction volume which was up 135% over the FY18 period. Bad debts were steady at 2.61%, although well above the 1.86% in the same period last year. So all this begs the question – why is Z1P lower today? It seems many in the market are fixated on the significant growth rate that Z1P will have to sustain if it is to thrive, while bad debts are seen as a potential problem to long term margins and cash flow.

Zip’s main competition, Afterpay, seems to be working hard to ensure they are the go-to point-of-sale credit platform. Afterpay dampened the fanfare regarding Zip’s quarterly with a business update of their own, showing sales had grown 289% for the year with 2.2M customers on the platform – well above the ~740K for Zip. Afterpay also noted their successful transition into America, with 200 retailers now live, while progress has been shown with respect to various regulatory queries including a cap being enforced on late fees. It seems APT has won this round.

Zip Co  (Z1P) Chart

z1p chart

Afterpay Touch (APT) Chart

Afterpay chart

Market Matters Take/Outlook

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