The Zip Co Ltd (ASX: ZIP) share price has experienced significant volatility over the last six months. It's still down more than 40% in six months, but it's up 66% since 7 April 2025. Is this the right time to buy or not?
The buy now, pay later stock seems to have been exposed to the massive changes in investor confidence as the US tariff situation changed. Zip's total transaction value (TTV) is exposed to US consumer spending and household confidence, so it is understandable that it has been more volatile than the general ASX share market.
Let's weigh up the positives and negatives of considering the Zip share price right now.
Negatives
The key risk for Zip is that the outlook is more uncertain for the US earnings.
That certainly doesn't mean its earnings are going to go backwards, or even that its growth is going to slow. However, there are a wider range of potential outcomes for the business in the foreseeable future.
The US federal cost reductions (and job cuts), US tariffs and other US administration changes could be a negative for the US economy. It may take longer than a couple of months for the full effects of whatever happens to be felt. The June 2025 quarter numbers from Zip will be interesting to see if there have been any noticeable changes.
Time will tell how this affects Zip's financial numbers.
Positives about Zip shares
The company certainly looks cheaper after its sell-off from several months ago, but the overall numbers continue to be very positive.
In the FY25 third quarter, cash operating profit (EBTDA) surged 219.4% year over year, total transaction value (TTV) increased 35.7% to $3.3 billion, total income increased 26.5% to $278.9 million, the net bad debts improved to 1.6% of TTV (from 1.7% a year ago) and active customers increased 4.2% to 6.3 million.
The broker UBS is forecasting that Zip could grow earnings at a compound annual growth rate (CAGR) of 30% between FY25 to FY27 and it thinks the macroeconomic risks are "largely priced in at these levels".
UBS currently has a buy rating on Zip shares, with a price target of $3.20. A price target is where the broker thinks the Zip share price could be in a year from the time of the investment call. That price target suggests a potential rise of 62% from its current level.
According to the broker's forecast, the Zip share price is valued at 60x FY26's estimated earnings and 14x FY29's estimated earnings.
