The Zip Co Ltd (ASX: ZIP) share price has been on fire of late.
Despite sliding 4.5% in intraday trade today, shares in the All Ordinaries Index (ASX: XAO) buy now, pay later (BNPL) stock are up an eye-popping 288% over the past six months.
In late afternoon trade on Thursday, shares are swapping hands for $1.24 apiece.
Despite that huge gain Citi believes there's more outperformance ahead for the company.
Yesterday, the broker lifted its target for the Zip share price by 79% to $1.40 (broker data courtesy of The Australian). That represents a further potential 13% upside from current levels.
Here's what's been going right for the company.
Zip share price catching global tailwinds
Two of the tailwinds helping the company's growth plans are inflation and interest rates.
With inflation coming down in Zip's target markets of Australia, New Zealand and the United States, the outlook for consumer spending is looking rosier.
Even more importantly, falling inflation means we're getting closer to seeing central banks cut interest rates. And the Zip share price, along with most every BNPL stock, has proven very sensitive to higher interest rates.
With the outlook for the so-called economic soft landing on the cards, the outlook for the BNPL sector is also looking up. That should help Zip continue to grow its user numbers and profitability in the core US market.
And the company's half-year results, reported on 27 February, certainly reinforced that growth outlook.
Among the highlights, Zip reported a 9.6% year on year increase in total transaction volume (TTV) to $5 billion. Revenue soared by 28.9% to $430 million. And the company's cash gross profit of $176 million was up 45.9% from the prior corresponding half year.
Another key metric that investors will have picked up on was the 1.30% increase in Zip's revenue margin, which reached 8.5% over the half year.
And with US operations charging ahead, TTV in Zip Americas leapt by 33.3% for a record half.
Surprisingly, the Zip share price closed down 14.4% on the day the company released its results.
The next day, ASX 200 investors looked to have had a change of heart and sent the ASX 200 BNPL stock up 13.1%.
