It has been another largely disappointing month for the Zip Co Ltd (ASX: Z1P) share price.
Since the start of October, the buy now pay later (BNPL) provider's shares have fallen 7.5% to $6.53.
This means the Zip share price is now down 55% from its February high of $14.53.
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Can the Zip share price rebound?
Thankfully for shareholders, one leading broker believes the Zip share price can rebound strongly from here.
According to a recent note out of Morgans, its analysts have retained their add rating but trimmed their price target on the company's shares slightly to $8.56.
Based on the current Zip share price, this implies potential upside of 31% for its shares over the next 12 months.
What did the broker say?
Morgans felt that Zip delivered a reasonably solid first quarter update last week. Though, it does acknowledge that the company's growth will need to accelerate in order to reach consensus estimates.
The broker said: "We saw 1Q22 group sequential revenue growth of 8% as a reasonable outcome (in Z1P's seasonally weakest quarter) and highlighting continued momentum. However, with the FY22 consensus revenue forecast ($689m) implying +71% growth on pcp, Zip's sales growth trajectory needs to improve meaningfully over Q2-Q4 to hit this level."
"Our other key quarterly takeaways were; 1) while Z1P's ANZ net bad debt ratio of 2.43% was largely in-line with pcp, it has risen from 1.87% at 4Q21; 2) revenue margins in the US were called out as still being around 7%; and 3) transaction value per average customer continues to decline in Australia (A$90), being roughly half of the pcp level, reflecting the impacts of Tap and Zip functionality," it added.
Outside this, the broker reiterated that sees significant potential if Zip delivers on its bold plans and notes that the Zip share price trades at a huge discount to rival Afterpay Ltd (ASX: APT).
Morgans concluded: "We continue to see longer term upside if Z1P can execute on its ambitions of becoming a global payments player. Noting the stock continues to trade at a significant discount to peer APT (~6x sales versus ~25x), we maintain our ADD recommendation."
