Zip Co Ltd (ASX: ZIP) shares are surging on Friday, up a hefty 12.4% to a new 52-week high of $2.17 at the time of writing.
Today's buying follows strong retail sales data out of the United States, which may have eased some recession fears and boosted investor confidence.
The S&P/ASX 200 index (ASX: XJO) is up more than 1% on the day as Aussie investors digest the news.
Meanwhile, Zip shares have been on a remarkable run, gaining 229% this year to date. Let's take a closer look at what's driving this latest move.
US retail data boosts market sentiment
US consumer spending showed unexpected strength last month, with retail sales rising by 1.1% in July compared to the previous month.
This figure far exceeded economists' expectations of a 0.3% increase and rebounded from a 0.2% decline in June.
US retail trade sales were driven largely by non-store retailers, who grew 6.7% year over year. This might suggest that US consumers remain resilient despite the current economic climate.
This positive news has lifted global markets, including the ASX, where Zip shares look to have benefited from the broader rally.
Being a payments company for retailers, investors may also see this as a positive sign for companies with links to the industry. Zip doesn't process payments in stores. But, its buy now, pay later (BNPL) model does provide leads to retailers.
What's next for Zip shares?
Adding recent momentum behind Zip shares was the company's recent quarterly cash flow update.
Zip reported $224 million in receipts from customers for the quarter ending 30 June 2024, matching the previous quarter's performance.
More impressively, Zip's operating cash flows surged by more than 225% compared to the December quarter, reaching $65 million.
After raising $583 million in borrowings and repaying $621 million of debt, it ended the quarter with a cash balance of $353 million.
But with all the excitement, one can't help but wonder what's next for Zip shares.
Brokers are bullish. Consensus rates it a buy, according to CommSec.
Meanwhile, UBS and Ord Minnett, which both rated Zip as a buy in July, have seen their price targets of $1.55 surpassed.
Time will tell if these brokers adjust their valuations higher..
Foolish takeaway
Zip shares continue to impress, riding the wave of strong US retail data overnight.
The share is up more than 450% in the past 12 months, outpacing the broader market by 440% in that time.
