Zip co-founder Peter Gray says the company should be “recession-proof.”
Peter Gray, co-founder of Zip Co, has argued that the Buy Now, Pay Later (BNPL) company can be resilient if the United States slips into a recession, after the embattled fintech reported that the number of bad debts had fallen dramatically .
In a quarterly update on Tuesday, Zip said that the crucial U.S. business posted “very strong seasonal performance” in the three months to December as it made progress on its mission to generate sustainable profits. Analysts stressed that Zip continues to burn cash, but the company claimed it has enough cash to support it until it turns a profit.
Amid market concerns about the potential for a US recession, Gray argued that the turnaround in its non-performing loans shows that Zip may be resilient to changes in economic conditions, including a potential recession.
“I think the US is very close to that scenario now and the results we are delivering demonstrate the strength and resilience of the model. I think we’re positioned really well, I look forward to continued sustained growth and gains over the next six to nine months, and we’re going to demonstrate the power of Zip and the power of the model in an economic downturn,” said Gray.
“Zip should be recession-proof.”
Zip, the second-largest local BNPL company behind Afterpay, faced severe pressure in 2022 as its share price plummeted as much as 95 percent from its peak, while valuations of loss-making tech companies continued to plummet.
The company, which offers short-term consumer credit, responded by cutting costs, closing overseas stores, tightening lending and laying out a plan to break even in the first half of 2024.
On Tuesday, Zip argued that it was making progress as it posted 12 percent sales growth and significantly lower bad debt in the US, a critical market.
Zip said that its preferred metric for U.S. cash earnings before taxes, depreciation and amortization (EBTDA) was positive in November and December and that it is on track for its metric to be “sustainably positive” as of the end of this financial year .
https://www.smh.com.au/business/banking-and-finance/zip-co-founder-says-it-should-be-recession-proof-as-bad-debts-fall-20230124-p5cf0s.html?ref=rss&utm_medium=rss&utm_source=rss_business Zip co-founder Peter Gray says the company should be “recession-proof.”