• Afterpay shares have hit an all-time high of $98.68 after Australia’s financial intelligence agency cleared the buy now, pay later giant of
  • Zip shares meanwhile are down over five per cent after the company released September quarter figures
  • Investors were hoping for stronger growth in the United States, one analyst says

Two BNPL giants headed in two different directions this morning, with the Zip share price (ASX:Z1P) falling on a quarterly update that the market found disappointing and Afterpay (ASX:APT) hitting an all-time high after settling regulatory issues.

Zip shares were down over five per cent on Wednesday morning, after announcing it had lifted its quarterly revenue 16 per cent from the previous quarter and up 88 per cent from a year ago.

Zip said it made $71.1 million in the three months to September 30, as it processed $943.1 million in transactions, up 18 per cent from the June quarter and up 96 per cent from a year ago.

The company processed 5.3 million transactions, up 23 per cent from the June quarter and up 130 per cent from a year ago.

Active customers grew to 4.5 million, up 15 per cent from three months ago and up 114 per cent from a year ago. There were 34,400 merchants on the platform, up 18 per cent for the quarter and 69 per cent year-on-year.

“We are incredibly proud of the global team with another set of record results across all key geographies – Australia, New Zealand, the United States,” Zip managing director and chief executive Larry Diamond said.

“In particular the US demonstrated significant growth with revenue and volumes up 50 per cent and 42 per cent quarter-on-quarter, with a number of marquee merchants going live in the quarter,” he said.

Why the Zip share price drop?

But the market seemed disappointed by the update, with the Zip share price down 5.7 per cent to a more than one-week low of $7.45 at 11:08am.

“They’re strong numbers, but the market was expecting more, much more, which is why the Zip shares have been sold down somewhat,” said Bell Direct market analyst Jessica Amir.

In particular, the market was looking for stronger growth in the United States following Zip’s QuadPay acquisition, Amir said.

In the US, Zip reported customers were up 22 per cent over the quarter to 2.2 million, with merchants growing 51 per cent to 6,800.

Still, on a fundamental basis, the metrics were quite positive for the company, with monthly arrears dropping from 1.33 per cent in June to 0.91 per cent in September.

Afterpay on afterburners

Afterpay meanwhile was up 2.7 per cent to $97.01, and had hit an all-time high of $98.68, after getting an all-clear from financial intelligence agency AUSTRAC.

It seems like a like a million years ago, but back in June 2019 Afterpay found itself in trouble with the regulator over compliance with anti-money laundering/counter-terrorism financing (AML/CTF) rules regarding identity verification of its users.

Afterpay was ordered to hire an independent auditor to examine the company’s compliance with the AML/CTF rules, who found historic breaches based on incorrect legal advice, but overall a strong “compliance culture”.

AUSTRAC has told Afterpay it will not take any further regulatory action, as the company has uplifted its AML/CTF compliance framework, Afterpay told the ASX on Wednesday.

Amir called the news “amazing for Afterpay… it’s a big tick, it’s brilliant”.

There’s still an inquiry by the Reserve Bank of Australia hanging over the sector, with the RBA considering whether to prevent BNPL companies from stopping merchants from imposing surcharges on their customers, Amir said.

“That’s the only real uncertainty for them. other than that it’s a pretty clear runway,” Amir said.

While the Afterpay share price may seem amazing considering the large cap was trading for under $30 at the start of the year, Morgan Stanley said in July that APT shares could hit $242.80 if it can replicate its success in Australia in overseas markets, Amir said.

Afterpay is currently Australia’s 15th largest public company by market capitalisation, behind Telstra (ASX:TLS).

“I think if you bought Zip at these levels it might be a bit overpriced, but there’s further upside in Afterpay,” Amir said.