👉 Background: Zip is the Aussie buy now, pay later provider that started way back in 2013. It grew rapidly in Australia and went on an acquisition spree in 2020 to become global. Zip acquired Quadpay, Twisto, and bought big stakes in companies like PayFlex, Spotii and Tendo. With losses mounting, Zip cut all of its businesses, except ANZ and the US. Eventually they recovered, with its Australian business becoming profitable.

‍👉 What happened: Now, Zip has announced its second quarter results - which on paper - look pretty good. Its EBITDA was up more than 50% from the same quarter last year, and revenue up more than 20% as well. But its revenue margin was squeezed tight in the most recent quarter.

‍👉 What else: With this missed forecast, investors ran to hit the panic button. In fact, trading volumes in Zip yesterday jumped to over three times the norm. And it's share price dropped more than 25%.

What's the key learning?

💡When a company has a history of volatility, investors are way more sensitive to any bad news.

💡When trading volume skyrockets, it usually means investors are either panic-selling or greedily buying in. And in Zip’s case, it was a full-blown sell-off. Between March 2021 and October 2023, Zip investors lost 98% of their share value…on paper.

💡 Luckily, Zip's share price has bounced back recently to over $2.50 per share. But despite revenue and EBITDA increasing, its squeezed revenue margin had everyone hitting the sell button.