Why did the Zip share price surge 21% in November?

We take a look at how the BNPL share fared last month.

| More on:
Man pointing at a blue rising share price graph.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Zip share price surged 21% in November 
  • Zip shares appeared to rise on improving investor sentiment in the BNPL sector 
  • Earlier in the month, Zip's CEO tipped the company can reach a positive EBITDA by 2024

The Zip Co Ltd (ASX: ZIP) share price had a stellar run in November.

Zip shares soared 21.3% from 61 cents at market close on 31 October to 74 cents on 30 November. They are up a further 0.7% in today's trade. The S&P/ASX 200 (ASX: XJO) is 0.86% in the green today, while it gained 6.1% last month.

Let's take a look at why Zip had such a good month.

What happened to Zip in November?

Zip was not the only ASX buy now, pay later (BNPL) share to lift in November. Sezzle Inc (ASX: SZL) shares rose 14%, while Tyro Payments Ltd (ASX: TYR) shares surged 15%. However, the Block Inc CDI (ASX: SQ2) share price fell 1% in November.

The Zip share price soared 29% between market close on 10 November and 17 November alone before pulling back.

Better-than-expected inflation data in the United States in the middle of the month had a positive impact on BNPL shares, including Zip. News also emerged in mid-November that retail sales were better than expected in October. A positive business update from ASX BNPL share Sezzle on 16 November also appeared to boost investor sentiment.

On 21 November, news emerged that regulation for the BNPL sector could be on the cards. Commenting on the BNPL sector, Finance Minister Katy Gallagher said:

People are starting to see it as a credit card. It's responsible to have a look at how it is regulated and how people are using it, what some of the problems are and how to provide that protection to people

Early in November, Zip CEO Larry Diamond provided hope Zip can deliver positive earnings before interest, tax, depreciation and amortisation (EBITDA) by the first half of 2024. Diamond said:

We expect to see the US exiting FY23 cash EBTDA positive and to neutralise the cash burn from our rest of world footprint during the second half of FY23.

We are on track to deliver positive cash EBTDA as a group in the first half of financial year 2024.

Diamond highlighted a potential US$10 trillion addressable market in the United States. He also said in Australia, one-third of adults have a BNPL account and Zip's brand awareness is 60% among the 18 to 45 market. Commenting on the US, Diamond said:

In the US, the addressable market is estimated to be over US$10 trillion and BNPL penetration is still under 2%, including just 4% of e-commerce and 1% of in-store spend. This demonstrates the sheer size, and early stage of the BNPL opportunity that we are positioned to capture.

Diamond moved to the US in October to help Zip take advantage of what he sees as a "significant opportunity" for fintech in the USA. He said at the time, "US banks are asleep at the wheel".

Zip share price snapshot

The Zip share price has fallen 85% in the past year, while it has climbed 4% in the last week.

For perspective, the ASX 200 has returned 1.45% in the past year.

Zip has a market capitalisation of about $529 million based on its current share price.

Motley Fool contributor Monica O'Shea has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Tyro Payments and Zip Co. The Motley Fool Australia has recommended Tyro Payments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Share Market News

Why is the Novonix share price pushing higher on Friday?

Why is this battery materials stock ending the week higher? Let's find out.

Read more »

Two brokers analysing stocks.
Broker Notes

Goldman Sachs says this ASX 200 stock is a buy with 25%+ upside

Let's see why the broker is bullish on this name right now.

Read more »

Happy man working on his laptop.
Share Market News

5 things to watch on the ASX 200 on Friday

Will the market end the week on a high? Let's find out.

Read more »

A young woman slumped in her chair while looking at her laptop.
Share Market News

Here are the top 10 ASX 200 shares today

Investors pulled back today after a strong week thus far.

Read more »

A cool man smiles as he is draped in gold cloth and wearing gold glasses.
Gold

2 ASX ETFs that just smashed new, all-time highs

These surging ETFs have something in common...

Read more »

A man holds his head as he looks at his laptop and contemplates more bills to pay.
Share Market News

What the latest Aussie retail sales data implies for ASX 200 investors awaiting an RBA interest rate cut

Investors awaiting RBA interest rate cuts will be studying the latest ABS retail report.

Read more »

Happy man holding Australian dollar notes, representing dividends.
Broker Notes

Why this cheap ASX All Ords stock could rise 50% and pay an 11% dividend yield

Goldman Sachs thinks that big returns could be coming for buyers of this stock.

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Gainers

Why Arcadium Lithium, Bellevue Gold, Catalyst Metals, and Northern Star shares are rising today

These shares are having a good session on Thursday. But why? Let's find out.

Read more »