Zip shares FY24 recap: Up 256%, what's next for FY25?

Could it be a repeat year for the BNPL player?

| More on:
A young woman smiles as she rides a zip line high above the trees.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Zip Co Ltd (ASX: ZIP) shares wrapped up FY24 on a high. Over the 12 months to June 28 2024, shares in the buy now, pay later (BNPL) stock soared 256% into the green.

The benchmark S&P/ASX 200 index (ASX: XJO) didn't even come close to that result.

Investors are eager to know what the future holds for the BNPL player. Especially as gains have continued into the new financial year.

Let's dive into the factors driving the recent performance and explore the expert outlook for FY25.

Why are Zip shares soaring?

Zip share price performance was impressive through the COVID-19 pandemic years. Investors sent the stock on a meteoric rise to an all-time high of $12.35 per share in February 2021.

They plunged not long after, wiping billions in market capitalisation from the company's value. The selling continued until October last year when investors returned to buy Zip shares at lows of 25.5 cents per share.

Fast forward to today, and Zip shares have rebounded to their current price of $1.65.

Zip's business performance under new management has been a major driver of its stock price recently. The company shifted from an aggressive growth strategy to a more sustainable, profitable model, garnering positive sentiment from investors.

Tyndall Asset Management's James Nguyen highlighted this transformation as a key differentiator from its BNPL peers. Speaking to The Australian Financial Review, Nguyen said:

[Zip] was previously a market darling, capitalised at over $6 billion despite reporting losses of more than $200 million per annum. Higher interest rates, loose credit leading to high bad debts, and a weaker consumer resulted in significant shareholder value losses.

While the macro environment is now more supportive, it is the company-specific turnaround under new management that sets Zip apart from its BNPL counterparts. Growth for growth's sake has been abandoned, as has its international domination aspirations, and in place is a sustainable, profitable growth strategy.

Nguyen says Zip's focus on profitability over growth for growth's sake is paying off. Within 18 months, the company expects to earn nearly $100 million in earnings before interest, tax, depreciation, and amortisation (EBITDA).

Additionally, Apple Inc.'s (NASDAQ: AAPL) decision to cancel its BNPL service in the United States, Apple Pay Later, appears to have increased investor confidence. This reduction in competition could help Zip increase its market share in the lucrative American market.

What's next for Zip shares in FY25?

UBS and Ord Minnett both maintain buy ratings for Zip shares, setting price targets of $1.55 apiece, respectively.

According to CommSec, the stock is rated a buy from consensus. Out of the seven firms covering Zip, five rate it a buy directly, four say it's a hold, and one firm rates it a sell.

Looking ahead, Zip's ability to maintain its profitability focus while growing market share will be crucial, in my view.

One key area to monitor is Zip's performance in the US market, where it has shown significant growth. Apple's decision to withdraw from the BNPL race could be a tailwind.

Setting context for this, in its most recent quarterly results, Zip reported a 14.6% year-on-year increase in transaction volume to $2.4 billion despite a 3% rise in active customers to 6 million.

But US revenues were up more than 49% to US$74.3 million, underscored by a 43% growth in transaction volume there.

Foolish takeaway

Zip shares have delivered stellar gains in FY24, locking in triple-digit gains for the year.

As the company continues its transformation under new management, the outlook for FY25 remains promising but requires careful monitoring. As always, remember to conduct your own due diligence.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Zip Co. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on BNPL shares

A man at his desk in an office holds his hands up in the air in frustration while looking at the falling share price on his computer screen.
BNPL shares

Zip shares fall despite return to ASX 200 index

The buy now pay later provider is back with the big boys.

Read more »

A cute young girl stands with her chest thrust out as she zips up the zip of a shiny pink jacket she is wearing.
BNPL shares

Is it too late to buy Zip shares at their 2-year highs?

Thinking long-term remains the key decision factor.

Read more »

A smiling market stall holder selling flowers holds out a payment machine to a customer who hovers her telephone over it to pay via Zip
BNPL shares

Up 327% in a year, the Zip share price just smashed new multi-year highs!

Zip was the second-best performing ASX All Ords stock in FY 2024 and continues to soar into FY 2025.

Read more »

A happy girl in a yellow playsuit with a zip gives the thumbs up
52-Week Highs

Zip shares surge 10%, bringing gains to 55% in a month

It appears recent developments continue being priced in to the BNPL player's stock.

Read more »

BNPL written on a smartphone.
BNPL shares

Could Apple's latest move boost Zip shares?

Apple is saying goodbye to its Apple Pay Later service less than a year after its launch.

Read more »

A young boy with a sombre face looks down at the zip fastener at the bottom of his jacket as he concentrates on unfastening the clasp.
BNPL shares

Has the Zip share price 'risen too rapidly'?

This expert is telling us to take Zip's profits off the table.

Read more »

A young boy with a sombre face looks down at the zip fastener at the bottom of his jacket as he concentrates on unfastening the clasp.
BNPL shares

Down 10% in April, is the momentous Zip share price rally over or just paused?

Zip shares gave back some of their eye-popping gains in April. What now for the ASX BNPL stock?

Read more »

woman using affirm to pay
BNPL shares

Why is the Zip share price climbing today?

ASX investors are bidding up the Zip share price today.

Read more »