As the top brass at buy now, pay later upstart Zip Co gathered for the group’s 2020 results in February last year, the mood was light. Larry Diamond, the chief of the group which pitches itself as a rival to dominant provider Afterpay, had just revealed a 130 per cent increase in revenue to $160 million and business was booming.
, which has an equally subdued share price to build its customer and merchant base and to move to profitability by 2024.Zip is just one of the buy now, pay later groups listed on the ASX to have suffered share price plunges over the past year.
“The core issue is that they are unprofitable. And now they’ve got bad debts that are actually going up and at the same time there’s an arms race around the world to get customers, so they’re actually going further and further down the desirable credit spiral and losses are therefore going up.” “If Zip achieves our forecasts, we do not believe that Zip will need to raise additional equity to fund its underlying operations.”
Other analysts back this view. Morningstar’s Shaun Ler believes the fair value of Zip’s shares is $4.70. “We think Zip has bright growth prospects,” Ler said in a note in March. Analyst Elise Kennedy from Jarden, which was co-lead manager on the notes issue, is also upbeat about the company’s prospects with a $5.75 price target.
Ahmed Fahour, the CEO of Latitude, which has secured a binding agreement to buy the short-term lender Humm for $355 million.“A lot of these groups were using shareholder money to cover their expenses as opposed to the profit of the business to cover their investment. And so there was a huge demand on cash. We are the exact opposite.”
Diane Tate, the chief executive of the industry group that administers the code, the Australian Finance Industry Association, says it was designed to provide more protection for consumers.
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