Shares in Zip Co experienced a significant downturn on Thursday, plummeting nearly 40 per cent after the company’s financial results fell short of investor expectations. Zip Co is a financial technology company that offers buy now, pay later services, allowing customers to make purchases and pay for them in instalments. The company operates in several countries, providing alternative payment solutions to consumers and businesses.
The company reported first-half cash EBTDA of $124 million, marking an 86 per cent increase year-on-year. However, this figure was 3 per cent below Citi’s consensus estimate of $128 million, primarily due to lower-than-expected net transaction margins. Core profit reached $52 million, which was 11 per cent below the broader consensus.
According to Citi analyst Siraj Ahmed, the US net transaction margin (NTM) declined from 3.7 per cent to 3.1 per cent, while net bad debts increased to 1.84 per cent, exceeding the company’s target. Zip anticipates that its second-half cash EBTDA will be broadly in line with the first half, resulting in a full-year cash EBTDA of $248 million, compared to the consensus of $261 million. The shortfall includes a foreign exchange headwind.
Ahmed noted, “We expect the share price to be weak today, given the result miss and FY cash EBTDA guidance being weaker than consensus. Focus will be on the expected NTM trajectory into FY27, especially for the US.” As of the latest trading update, Zip Co’s shares were down 38.8 per cent.
