The Zip (ASX:Z1P) share price has struggled in recent weeks. But, according to the company, here’s what investors can look forward to in 2021.
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Zip Co Ltd (ASX: Z1P) shares have tumbled 25% from their record all-time high of $14.53 set on 16 February.
What could impact the Zip share price in 2021?
Continued momentum in the US
According to Zip, its Quadpay acquisition has cemented the company as one of the fastest-growing buy now, pay later (BNPL) players in the United States. The Zip share price surged higher on the day it announced the deal in August last year.
After the completion of the Quadpay acquisition in August 2020, Zip managed to grow its total transaction volume (TTV) by more than 130% since the completion. The US is also contributing to an increasing share of Zip’s overall performance, from 35% of the group’s TTV in its 1Q21 update to more than 40% of TTV in December.
ANZ to continue its strong performance
The Australia/New Zealand segment continues to represent a core and reliable region for the company. Zip was able to emerge as Australia’s most downloaded BNPL app in December and January, surpassing its rival Afterpay Ltd (ASX: APT). The company noted that 85% of its customers since September 2019 still have the Zip app.
From an engagement perspective, Zip is seeing a continuous year-on-year improvement with new cohorts transacting more frequently, translating to higher revenues per customer.
Zip business as an emerging revenue stream
While Afterpay might be making an attempt to launch its own banking app, Zip is targeting small businesses with the launch of Zip Trade.
Zip Trade provides small businesses with enhanced liquidity for everyday purchases and supplies of up to $3,000. The product launched in December with a strong initial uptake providing momentum into the second half. Zip intends to launch Zip Trade+ in 2H, providing SMEs (small to medium enterprises) solutions of up to $150,000.
The company is leveraging its partnership with Facebook for access to thousands of SMEs which can choose to advertise now and pay later.
UK to scale meaningful revenues
Zip officially launched in the United Kingdom in December. According to the company, it hit the ground running with a new mobile app that mirrors Quadpay’s functionality.
The UK represents an important growth market that Zip believes has the potential to scale into meaningful revenues for the business.
Afterpay, for example, was operational in the UK in late 2018 with its Clearpay app. Its recent 1H FY21 report highlighted the UK’s $800 million, or 8.2% contribution, to group sales, up from $200 million, or 4.2% in 1H FY20.
Evaluating strategic expansion options
Zip has taken aim at pro-actively exploring the best entry paths into target jurisdictions. The company is currently focusing on the launch of Quadpay in Canada, having mobilised a team to enable a soft launch.
Other endeavours include a minority investment in two separate BNPL players in Eastern Europe (Czechia and Poland) and the United Arab Emirates.
According to Zip, it aims to “…do things differently. With a laser focus on relentless product innovation…”. How this strategy, along with the company’s expansion endeavours, will shape the Zip share price moving forward remains to be seen.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Facebook. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.