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

Thinking long-term remains the key decision factor.

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Zip Co Ltd (ASX: ZIP) shares have seen a dramatic turnaround in the last 24 months. After bottoming to multi-year lows of 28.5 cents apiece in October last year, the stock has now rallied to trade at $1.78 at the time of writing – its highest mark in two years.

In fact, Zip shares have spiked by 330% over the past 12 months, making them one of ASX's top performers in that time.

With this surge, investors are questioning whether it's too late to join the Zip bandwagon. Is it? Let's see what the experts think.

What's driving Zip shares higher?

Zip shares notched new multi-year highs of $1.82 apiece at Tuesday's close. This is their highest since February 2022, as seen in the chart below.

This surge follows a significant turnaround in the company's strategy and performance. Over the past year, Zip has pivoted from aggressive growth to a focus on profitability, which has been well-received by the market.

The company's results for Q3 FY24 showed a 14.6% year on year increase in total transaction volumes (TTV) to $2.4 billion. More than 43% growth in transaction volumes came from the US alone.

Looking ahead, I see the company's performance in the US market – where it has shown significant growth – as a key area to watch.

Additionally, the exit of Apple from the buy now, pay later (BNPL) market in the USA saw another buying thrust in Zip shares.

Is it too late to buy Zip?

Experts are divided on whether it's too late to buy Zip shares at their current highs.

UBS and Ord Minnett both rate the BNPL company a buy, setting price targets of $1.55 apiece. Notably, this is below the current share price on Wednesday.

But, both brokers acknowledge that investors should consider the risks associated with BNPL stocks, especially in a higher interest rate environment.

The consensus from CommSec also suggests a positive outlook, with four out of eight firms rating Zip as a buy.

The outlook on buying Zip shares also depends on several personal factors, including (but not limited to) long-term investment goals, personal risk tolerances, and current financial position.

The decision to buy a stock or not shouldn't be solely based on price movement, either. Business fundamentals are what matter over the long run.

So, for those investors with a long-term view, an appraisal of the company's long-term prospects – rather than month-to-month movements in its share price – is more appropriate.

In that vein, depending on your answers to the above points, it may or may not be too late to buy ZIp shares.

Foolish takeaway

Zip shares have delivered stellar gains in the past year, with a 330% increase. While the company's strategic shift towards profitability and the exit of a major competitor has boosted its prospects, remember to conduct your own thorough 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 Apple and Zip Co. The Motley Fool Australia has recommended Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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