The Zip Co Ltd (ASX: Z1P) share price is trading notably higher for a second day in a row on Tuesday.
In afternoon trade, the buy now pay later (BNPL) provider's shares are up a sizeable 9% to $7.90.
This means the Zip share price is now up 19% in the space of two days.
Image source: Getty Images
Why is the Zip share price racing higher?
Investors have been bidding the Zip share price higher this week after Afterpay Ltd (ASX: APT) agreed to be acquired by US payments giant Square.
This sparked hopes that Zip may receive a takeover approach of its own. Especially given recent speculation that rival Klarna has been building up a secret position in the BNPL provider.
Can its shares keep rising?
The good news for shareholders is that one leading broker believes the Zip share price can still keep rising.
According to a note out of Citi this morning, its analysts have retained their buy rating and $8.90 price target on the company's shares.
Based on the latest Zip share price, this implies potential upside of 12.5% over the next 12 months.
What did the broker say?
While Citi acknowledges that Square's acquisition of Afterpay increases the competitive risks for Zip and its QuadPay business, it also notes that it highlights its takeover appeal.
Citi commented: "We see mixed read-throughs for Zip from Square's takeover of Afterpay – on the one hand it increases the takeover appeal for Zip, especially given the fast growing US business. However, arguably the Afterpay sale speaks to the importance of scale especially given increasing competition and our concern is that the combination of Square and Afterpay increases the medium-term risk for Zip given it increases the scale disadvantage of Quadpay relative to its competitors in the US."
