The BNPL company is off to a great start this week.
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The S&P/ASX 200 Index (ASX: XJO) is decidedly not having a great start to the trading week this Monday. At the time of writing, the ASX 200 is down a hefty 0.7% today so far to 7,470 points. But one ASX 200 share that is defying this ASX 200 gravity today is Zip Co Ltd (ASX: Z1P). Zip Co shares are up today, presently by a healthy 2.3% to $6.94 a share. That’s after initially rising all the way to $7.05 earlier this morning too.
So why are Zip shares rallying so enthusiastically in the face of a sinking market?
Well, it’s not immediately clear. There are no major news or announcements out of Zip today so far. But it is worth noting that one of Zip’s fellow buy now, pay later (BNPL) peers are also defying the ASX 200’s malaise. Afterpay Ltd (ASX: APT) shares are up 0.97% to $131.98 so far.
A new BNPL competitor?
We did get some news out of the BNPL space today though, which may be affecting the Zip share price. Today, the ASX banking and insurance giant Suncorp Group Ltd (ASX: SUN) put out a press release on some new BNPL plans the company is initiating.
According to the release, Suncorp has announced a new BNPL product called ‘PayLater’. Suncorp says this new “interest-free” BNPL product “can be used to make payments at more than 70 million merchant locations worldwide, wherever Visa is accepted”.
Suncorp expanded on this by stating the following:
Available to Suncorp Bank customers from November via the Suncorp App, PayLater is designed to give customers more choice around how they pay, and at no additional cost to retailer…
Unlike some other banks offering digital-only BNPL, PayLater gives customers the option of a digital or physical PayLater Visa Debit card that can be used both in-store and online.
As the bank indicated, PayLater will not hit merchants with extra fees. This stands in stark contrast to other BNPL providers like Zip and Afterpay. Both of these BNPL providers charge a chunky surcharge on retailers running sales through their BNPL networks.
PayLater will also have a $1,000 limit, depending on eligibility, and will be available for purchases above $50. It will also have a capped $10 late fee per purchase for customers who fail to pay back their instalments on time.
About the Zip Co share price
Even though Suncorp’s announcement can easily be taken as a new threat to Zip (and Afterpay), today’s share price rises seem to fly in the face of this thesis. Either the market isn’t bothered by this announcement. Or it simply isn’t enough to stop some enthusiastic buying pressure for Zip shares today.
Year to date in 2021 so far, Zip shares are still up a healthy 24.7%. However, they are also only up a far more sluggish 1.01% over the past 12 months. At Zip’s current share price, the company has a market capitalisation of $3.81 billion.
Should you invest $1,000 in Zip right now?
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.