On Wednesday, RBC Capital adjusted its stance on shares of Zip Co Ltd (ZIP:AU) (OTC: ZIZTF), raising the stock from Sector Perform to Outperform and increasing the price target to AUD1.90 from AUD1.10. This upgrade followed a positive fourth-quarter report and an improved outlook for the fiscal year 2024.
The company's fourth-quarter results were notable for an approximate 11% increase at the midpoint in the FY24 cash EBTDA guidance, now set between $67 million and $70 million. This update from the previous minimum guidance of $60.8 million underscores the significant operating leverage within Zip Co's business.
Moreover, the firm experienced better than anticipated top-line growth in the Australia and New Zealand markets and continued to report over 40% Total Transaction Value (TTV) growth in the US market. These achievements reflect the company's robust performance and potential for future growth.
In a strategic move to strengthen its financial position, Zip Co announced a $217 million fully underwritten equity placement, along with an up to $50 million non-underwritten Share Purchase Plan (SPP). The funds raised are intended for the early repayment of the company’s corporate debt facility, to bolster the balance sheet, and to provide additional liquidity for pursuing growth opportunities.
The company anticipates that the reduction in corporate interest expense from these financial actions will be earnings per share (EPS) accretive in the fiscal year 2025. This forward-looking statement indicates confidence in the company's financial strategy and its positive impact on shareholder value in the coming years.
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