Here’s why the Zip share price had a ripper month in July

Unless something terrible happens over the remainder of today’s session, the Zip Co Ltd (ASX: ZIP) share price will smash the market in July.

As things stand, the buy now pay later (BNPL) provider’s shares are on course to record a gain of 10% this month.

As a comparison, the S&P/ASX 200 Index (ASX: XJO) looks set to record a monthly gain of 2.5%.

Why did the Zip share price thump the market in July?

A key driver of the Zip share price gains this month appears to have been the release of the company’s quarterly update.

That update revealed that the company’s key metrics are all moving in the right direction.

For example, total transaction value (TTV) increased 6.4% to $2.3 billion, revenue rose 21.1% to $193.8 million, and its core cash transaction margin increased 30 basis points to 3.1%.

Another positive that may have caught the eye of investors was its credit loss rates in the US which have fallen 35 basis points to 0.85% of TTV. That’s despite the tough economic environment, which appears to demonstrate that Zip’s credit management is delivering results.

Commenting on the update, CEO Larry Diamond said:

Today we delivered another strong set of results driven by particularly strong revenue growth of 21.1%, improved margins, and a disciplined approach in how we grow and run our business. We’ve seen the cash transaction margin for the core business improve again to 3.1% and we are pleased to deliver such a strong result despite the rising cost and interest rate environment. This performance yet again demonstrates the resilience and strength of the business in a challenging macroeconomic environment.

But perhaps the biggest positive of them all is the company’s progress towards profitability. Management advised that the US business was cash EBTDA positive on a monthly basis at the end of FY 2023. Diamond adds:

As we finish FY23, I am excited to see the US business exit the year cash EBTDA positive on a monthly basis and very well-positioned for sustainable growth in FY24.

All in all, the market appears to believe that the company has now turned an important corner and have been bidding the Zip share price higher in response.