Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
ZIP Co LTD , an Australian finance company has seen phenomenal stock growth since January this year , posting a 500% increase from January to October 2019 . As at market close November 1 , ZIP is currently priced at $3.80 with an impressive Yearly return of 295.83% (Z1P Motley) . ZIP’s astronomical growth is as a result of it’s revenue growth averaging over 70% per year aswell as a strong FY report and it’s client base forecasted to double to over 2.5 million by 2020 . The most exciting aspect about ZIP is the market share it already holds in the Buy Now Pay Later (BNPL) industry which is becoming a mainstream financial service for individuals .
Recent Market Correction
In recent months , ZIP stock value fell from $5.53 to $3.76 in a fortnight due to UBS recommendations to sell off Z1P aswell as other BNPL companies .The note left by UBS broker , concerned the idea that many of ZIP clients may have questionable credit ratings . The risk with BNPL is that it will virtually allow most of the population to create an account , with no heavy back checks . However , the BNPL industry mitigates risk through loaning small amounts of cash and making it easier for the younger demographic to buy consumable goods and pay it back in periodic intervals.
What’s the trend for ZIP and when is a good time to buy ?
Now when trying to understand a good time to buy a stock, it is essential that you understand how risk will specifically effect your stock. A fundamental indicator of risk compared to the market is Beta , as BNPL holds a higher default risk it also means that ZIP will be highly volatile compared to the market . The Beta of ZIP is 1.96 , 0.96 higher than the market risk =1.00 . However is 0.30 less than Afterpay at 2.26 . With a lower Beta than AfterPay , it is one encouraging sign that ZIP is only going to increase in value over the coming year . At it’s lowest price in 6 months , it is no lie that ZIP can be considered under-priced making it undervalued from our research .However, you must conduct your own research before finding the right entry price.
However , it must be noted that ZIP may take a further fall depending on what current stakeholders believe the company is capable of .
The most exciting aspect about ZIP is that it is in such a great position , an emerging industry that has a growing demographic which has revolutionised borrowing . In my opinion , ZIP is a very exciting investment opportunity, however with a strong non-diversifiable risk it must be monitored and closely examined before entering. If you are already holding , it is more so whether you see ZIP as a long term goldmine or whether it is a one and done and will not gain anymore value . Considering AfterPay is currently at $27.14 , it is no lie that the BNPL industry seems to keep on giving .
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
The information above is to be used as general investment guidance. Youth Investment Group has no liability for personal financial interests or investment decisions.
Written by Tyger Fitzpatrick , Founder of Youth Investment Group