If you think the growth opportunity for fast rising Zip Co Ltd (ASX: ZIP) shares has come and gone, you may want to have another think.
It's true that shares in the S&P/ASX 200 Index (ASX: XJO) buy now, pay later (BNPL) stock have been going ballistic this past year.
In morning trade on Thursday, shares are up 3.2% at $2.46 apiece, potentially enjoying a boost from the jumbo-sized overnight interest rate cut from the US Fed.
That sees Zip shares up some 779% since this time last year.
Or enough to turn a $6,000 investment into $52,714 in just 12 months.
Try getting that from your term deposit!
But as with all big gaining stocks, can Zip continue to grow its business and reward shareholders?
According to fund managers Robert Hawkesford and Daniel Broeren at the Blackwattle Small Cap Quality Fund, very much so.
Zip shares a core positive contributor
Blackwattle noted that Zip shares counted among a handful of key positive contributors to the fund's performance in August.
"Zip Co rose 26% in the month, continuing its run of good form since announcing a $267 million capital raise to remove corporate debt in July," the fund managers said.
Blackwattle added:
Zip's recent journey has been one of improving quality, with reduced industry competition, strong US growth (US 4Q24 Revenue +47% vs pcp) and retail partner validation – including Google Pay and Stripe integration in the US – now supported by a >$100m annualized EBITDA run-rate, positive cash flow and a clean balance sheet.
As for their outlook for Zip shares, Hawkesford and Broeren noted:
Despite Zip's strong recent performance, we still see significant opportunity for growth in the US where Buy-Now Pay-Later (BNPL) penetration is only 2%, versus ~15% in Australia and ~20% in Europe.
What's been happening with ASX 200 BNPL stock?
As Blackwattle pointed out, Zip shares' huge lift over the past year has been driven by the company's strong performance.
At Zip's full year financial results announcement (FY 2024), the company reported a 28.2% year on year increase in revenue to $868 million. And total transaction volume (TTV) of $10.1 billion was up 14.0% from FY 2023.
That helped Zip achieve a cash gross profit of $373 million, up 52.8% from the prior year.
As for the balance sheet, Zip had available cash of $80.4 million as at 30 June.
And with the Fed now embarking on its easing cycle, the growth potential for Zip shares in the US still looks strong.
