Company Interview / Opportunities amidst the reporting season selloff

Key Points:

Extreme volatility seen across many ASX reporting companiesZip (ASX:ZIP) delivers strong numbers, but market focuses on rising bad debtsNew products at Zip may improve bad debt outlook and drive share price recoveryAussie Broadband (ASX:ABB) poised for strong growth through AGL partnership and upgraded guidance

Bowen Hosking from Enhanced Asset Management highlights the exceptional volatility of the current reporting season, noting that nearly half of the companies in their coverage have experienced daily share price movements exceeding ±10%. Hosking draws attention to Zip (ASX:ZIP), which suffered a 30% share price drop despite delivering strong headline results, including a 30% rise in revenue, 40% growth in US transaction volume, and net profit after tax up over 120%. The market has become increasingly concerned by a steady increase in bad debts, now at 1.73%, although Hosking points out this figure remains within company targets. The launch of Zip’s Pay in 8 product, with its longer repayment period, has contributed to higher bad debts, but Hosking sees potential for improvement with the introduction of the Pay in 2 product, which is expected to reduce defaults.

Hosking maintains a significant holding in Zip, stating a willingness to add more if bad debts decline and margins improve. The view is that the share price could rebound swiftly if these metrics trend favourably over the coming quarters.

Turning to the telco sector, Hosking praises Aussie Broadband (ASX:ABB) for its outstanding report, partnership with AGL, and ambitious growth strategy. Aussie Broadband’s deal will leverage AGL’s customer base, potentially doubling market share and supporting earnings growth of 30% annually over three years. Hosking sees strong value in Aussie Broadband for long-term investors.