Zip share price jumps as broker goes on myth-busting bender

Analysts have attempted to dispel some "myths" surrounding the BNPL company's outlook.

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Key points
  • The Zip share price is higher today amid bullish analyst comments this morning
  • Zip reported a $1 billion loss in FY22
  • However, Jarden analysts say the ASX BNPL company has a positive outlook for FY23

The Zip Co Ltd (ASX: ZIP) share price is up in late afternoon trading amid bullish observations from analysts at Jarden earlier today.

The ASX buy now pay later (BNPL) share currently trades for 84.5 cents, up 1.81%, after hitting an intraday high of 90 cents a share. That's a gain of more than 8%.

Zip is outperforming the S&P/ASX 200 Index (ASX: XJO) which is down 0.33% at the time of writing.

Let's cover what the analysts said about Zip shares.

A man casually dressed looks to the side in a pensive, thoughtful manner with one hand under his chin, holding a mobile phone in his hand while thinking about something.

Image source: Getty Images

What did the analysts say?

As reported by The Australian, Jarden analysts Elise Kennedy and Tim Halliday provided an alternative view of Zip's contentious results for FY22, which included a $1 billion loss.

Notably, the analysts said the slowdown in retail sales that Zip is forecast to experience is a "myth" and part of several misconceptions that surround the company.

The analysts said:

Overall, counterintuitively and against consensus, we could see a push towards increasing need from merchants. This could help see a reduction in the marketing dollars that have to be added to the merchant deals in the US and also reduce the pressure on merchant fees.

They continued:

Importantly too, in Australia, the no-surcharge rule change means that merchants can now pass on this cost to the consumer. It may mean less subscribers but a more profitable consumer that continues its usage.

The pair set out to dispel more myths, including Zip's credit losses and the forecast that it can't break even on its cash flow.

On the credit front, Kennedy and Halliday observed Zip was "tightening measures across the whole cycle to help contain its credit losses".

And as for cash burn, the analysts wrote:

Zip had previously guided to being breakeven in FY24, but at the FY22 result, they had enough visibility to narrow that window. It is already cash positive in the ANZ market and expecting to achieve that in the US as it exits FY23. The Rest of World (ROW) strategic review is underway with predictions the second half will see Zip "neutralise" ROW cash burn.

Zip share price snapshot

The Zip share price is down 80% year to date and 87% over the last 12 months.

The company's current market capitalisation is approximately $584 million.

Motley Fool contributor Matthew Farley 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 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 Scott Phillips.

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