Zip Co Ltd (ASX:Z1P) and this ASX growth share could be quality options for investors in April. Here’s why they are highly rated…
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If you’re a growth investor then you’re in luck. The Australian share market is home to a number of quality shares that have the potential to grow strongly in the future.
Two top ASX growth shares that have been tipped as buys are listed below. Here’s why they are highly rated:
Redbubble Ltd (ASX: RBL)
The first ASX growth share to look at is Redbubble. This ecommerce company’s shares have come under significant pressure this month following the release of its third quarter update.
For the three months ended 31 March, Redbubble reported a 54% increase in gross transaction value to $134 million. However, from this, it only generated EBITDA of $2.2 million. This compares to its first half EBITDA of $48.8 million, which averages out at $24.4 million per quarter.
Management advised that it is sacrificing margins in order to invest in its growth. An investment that it hopes will lead to gross transaction value of $1.5 billion by 2024 with an EBITDA margin of 10% to 15%. This compares to gross transaction value of $620 million and an EBITDA margin of 9% in 2020.
In response to the update, RBC Capital held firm with its buy rating but cut its price target to $5.60. This compares to the latest Redbubble share price of $4.08.
Zip Co Ltd (ASX: Z1P)
Another ASX growth share to consider is Zip. Thanks to the increasing popularity of the buy now pay later (BNPL) payment method with consumers and retailers across the world, Zip has been growing at a rapid rate in recent years.
This has continued in FY 2021, with Zip recently releasing its third quarter update. That update revealed an 80% increase in group quarterly revenue to $114.4 million. This was driven by a 195% increase in transaction numbers to 12.4 million, a 114% jump in quarterly transaction volume to $1.6 billion, and an 88% lift in active customers globally to 6.4 million.
The key driver of its growth was its Quadpay business in the United States. Pleasingly, with a $5 trillion market opportunity in the country, this side of the business still has a significant runway for growth over the next decade and beyond.
One broker that was pleased with its update was Citi. In response, the broker upgraded its shares to a buy rating with an $11.30 price target. This compares to the latest Zip share price of $8.90.
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*Returns as of February 15th 2021
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- Why Zip (ASX:Z1P) and this ASX growth share are rated highly
James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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