The Zip Co Ltd (ASX: Z1P) share price is going nuts. It rose 13% on Monday and it’s up 64% since 20 January 2021.
The latest news
According to reporting by the Australian Financial Review, the buy now, pay later business is focusing on the US.
It’s already operating in the US with its QuadPay business, but the company now has its eyes on US investors.
Zip management are trying to get the attention of investors in the US who are willing to give Afterpay Ltd (ASX: APT) such a large valuation. If Zip can successfully explain its business model and get more investors on board then it could raise capital and command an even higher share price.
The other thing that Zip is doing is thinking about a secondary listing in the US which could give bigger access to US capital markets where some investors only want to invest in US-listed shares.
What else is driving the Zip share price?
Its strong merchant sales are a core reason for the increasing Zip share price.
For the December 2020 quarter, Zip said that it achieved record quarterly revenue of $102 million, up 88% year on year. The December revenue was $40.2 million, up 94%.
The revenue growth was driven by record quarterly transaction volume of $1.6 billion, up 103% year on year. The December transaction volume was $628.4 million, up 104%. Transaction numbers were up 149% year on year to 10.7 million.
Customer numbers and merchant numbers continue to rise. The number of customers rose by 97% year on year to 5.7 million and merchants on the platform rose by 73% year on year to 38,500.
Looking at the North American division, Zip US (QuadPay) delivered a record result across all core metrics. It generated $673.1 million of transaction volume, $47.6 million of revenue and attracted 915,000 new customers. December transaction volumes exceeded November by 7.5%, despite the entire Black Friday and Cyber Monday weekend falling in November.
Summary thoughts
To me, Zip has just as good growth potential as Afterpay – it’s already operating in Australia, the US and now the UK. It just needs a bit of time to win more merchants and customers. I’d still rather own Zip shares than Afterpay. But I’m not sure if any of these valuations make sense.
But in the payments space, I’d rather invest in other ASX growth shares like Pushpay Holdings Ltd (ASX: PPH) or EML Payments Ltd (ASX: EML).
