Shares in buy-now-pay-later Zip Co Ltd (ASX: Z1P) surged an additional 6.44% yesterday as the BNPL sector continues to recover.
This means that Zip’s shares have now increased over 21% over the past month and an even more impressive 63% since the start of the year.
Here’s what could be driving Zip’s share price higher recently.
Z1P share price
Tech sector recovers
It isn’t just Zip that’s been making some gains recently. The broader tech sector has shown signs of recovery with the ASX All-tech Index (ASX: XTX) up nearly 15% over the past month.
Other large-cap tech winners have been Afterpay Ltd (ASX: APT), Altium Limited (ASX: ALU), Pro Medicus Limited (ASX: PME) and WiseTech Global Ltd (ASX: WTC).
US-based BNPL Affirm Holdings Inc (NASDAQ: AFRM) has also had a strong June and is up nearly 20%. Given how closely our tech sector follows the US, it makes sense why Zip has been a strong performer recently.
The recovery in the sector could partly be driven by the US 10-year treasury bond hitting a two-week low. The market seems divided between inflation fears and what this could mean for growth stocks. It almost feels like a daily tug of war of rotating between value and growth sectors.
What’s to like about Zip?
Zip is operating a large, structurally growing industry as consumers continue to switch from traditional credit products to BNPL services.
It has a large international reach with a big presence in the US and more recently Europe and the Middle East.
Zip seems to have a great company culture indicated by its 4.7-star rating on Glassdoor. 96% of respondents said they’d recommend working at the company and 99% approved of the current CEO.
This can be an important aspect to consider as a positive work culture will help the company retain talent and continue to innovate its product offering.
Time to buy Zip shares?
There’s definitely an argument to be made for the bull case of the BNPL sector. On the other side of that, it could be wise to consider some of the potential risks.
Competition, interest rate and regulation risk around surcharging would be just a few that come to mind.
What’s a fair price to pay for Zip shares? Here’s just one way I consider Zip’s valuation: One simple way I value Zip (ASX: Z1P) shares…Is now a buying opportunity.
