Zip (ASX:ZIP) Co Ltd (ASX: ZIP) has officially rejoined the prestigious S&P/ASX 200 Index today. This marks a significant comeback for the buy now, pay later (BNPL) company, which had previously lost its position among the top 200 largest listed companies by market cap. The fall from grace came after its share price plummeted by more than 95% over the course of 2021 and 2022, largely due to market challenges and changing investor sentiments.
However, the narrative around Zip, an ASX financial stock, has dramatically shifted over the past 12 months. During this period, Zip shares have soared by an astonishing 278%. This remarkable recovery can be attributed to the company's strategic pivot under new management. The shift has moved Zip away from a growth-at-all-costs strategy to a more sustainable and profitable business model. This transformation has captured the attention and confidence of investors, leading to a significant rebound in its market performance. Consequently, Zip's market cap has grown to an impressive $1.97 billion.
The announcement of Zip's return to the ASX 200 came on July 12, much to the delight of its shareholders. The S&P Dow Jones Indices revealed that Zip would be replacing Altium Limited (ASX: ALU) in the benchmark index, effective today. This change followed Altium's acquisition by Renesas Electronics Corporation, making room for Zip's reentry. Being part of the ASX 200 is a notable achievement for any company, as it includes only the largest and most influential companies listed on the Australian Securities Exchange.
This reclassification is not just a symbolic victory for Zip. It carries practical implications for the company's stock. Many fund managers, who are restricted to investing in larger market cap companies, now have the opportunity to include Zip in their investment portfolios. Additionally, index tracking funds that aim to mirror the ASX 200's performance will need to purchase Zip stock to ensure their portfolios accurately reflect the benchmark. This can potentially provide added support and stability for Zip's share price in the long term.
Despite the positive developments and the significant milestone of rejoining the ASX 200, Zip shares have not experienced an immediate boost from their reclassification. At the time of writing, the stock is down 2.1%, trading at $1.66 per share. This decline is occurring alongside a broader market downturn, with the ASX 200 itself down 0.7%. It remains to be seen how Zip's inclusion in the ASX 200 will impact its share price in the coming weeks and months, but the company’s recent achievements and strategic direction suggest a promising future.