![]() It might be able to do this at some point, but how long will this take exactly, I’m not sure. ![]() My point is, even under some pretty stretched valuation assumptions, the company has to earn more than what it’s currently making to justify today’s valuation. ![]() With a P/E of 30x, we would still be looking at $100 million and $1 billion in implied earnings and revenue. To put that figure into perspective, Zip recorded $161 million of revenue in FY20.Įven if I assume a higher P/E ratio of say, 20x, we get implied earnings and revenue of $150 million and $1.5 billion, respectively. Under this assumption, $200 million in net income would imply $2 billion in revenue. I’ll give Zip an added margin of safety and assume it can achieve a higher margin of 10%. I am going to use the only profitable listed BNPL provider I could find, Humm Group Ltd ( ASX: HUM), which generally achieves a 7% net income margin. You could then work out the implied revenue by using a net income margin of a competitor. However, I think it’s fair to say that Zip or any other BNPL will not trade on a multiple that low, as BNPL companies seem to carry a loftier tech-like valuation.Īssuming a P/E of 15x sometime after the company matures out, with a market cap of $3 billion, this would imply net income (post-tax) of around $200 million. Keep in mind that companies in financial services generally trade on a P/E of around 10x. Please be aware that this model of valuation is not perfect. I’m going to use a basic P/E ratio to work out the implied earnings that Zip would roughly have to generate in order to justify its current market cap. Just a few days ago, Zip announced it was ramping up its entry into the UK market to try and tap into a $600 billion addressable retail market, only for the Zip share price to remain exactly where it was at the open. So the market might expect more growth in order to justify an even higher price tag. I think the market has partially realised that Zip still lacks the revenue generation to justify its $3 billion market capitalisation. In addition to this, Zip is heavily traded among day traders who might be willing to close out positions with smaller returns, adding further pressure on the sell-side. Whenever there seems to be an initial upwards trend in the Zip share price, my guess is that there might be many investors who close out their positions. In my opinion, there might be two possible reasons why the Zip share price doesn’t seem to want to budge from around its current level.įirstly, there may be many investors who picked up Zip shares months ago when the share price was much higher (around the $8-9 mark). Much of this performance has resulted from its popular app, which finished the month rated at #3 in the finance category on the Australian app store and #16 in the shopping category in the US. ![]() Z1P November monthly updateĭespite the severity of the COVID-19 situation in the US, Zip US, under the QuadPay brand, has also seen some incredible growth recently, with transaction volume 65% higher than last month. ZIP share price chart Source: Rask Media 1-year Zip share price chart Zip’s November updateĪs you can see from the table below, Zip has been able to keep up this year’s momentum with significant growth across transaction volume (up 44%), newly added customers (up 464k), and total transactions (up 50%) from last month. In typical Zip fashion, the share price finished in the red off the back of the positive operational news, with rival Afterpay Ltd ( ASX: APT) somehow finishing slightly higher than its previous close with no obvious news or announcements. Snap has the opposite problem, where new revenue channels are opening at the company even as the share prices drop because investors don't use or understand Snapchat.Yesterday, buy now pay later provider Zip Co Ltd ( ASX: Z1P) released its November trading update, revealing record results across all regions. Investors seem to like Twitter because they are avid users of the platform, even though financials are weak at the company, according to Stifel. Then there's Stifel, which thinks investors simply just don't understand Snap. Barclays thinks a rush of selling on that date will push down the price further and make for an attractive entry point for hesitant Snap investors. July 31 will be the first day a large swath of shares held by company insiders will be able to trade freely. Some investors are seeing the low share price as an attractive entry point, however.īarclays thinks the best time to buy will come after a lockup expiration at the end of the month. Investors are worried that Snap's user growth will be impacted by strong competition from apps like Facebook and Instagram, which have been known to replicate Snap's features in their own apps. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |