Zip Co Ltd (ASX: ZIP) shares have been an especially volatile ASX stock over the past few years.
Zip Pay is a 'buy now, pay later' service. It allows customers to make purchases and pay for them over time (whether that be weekly, fortnightly, or monthly), with the option of interest-free payments. The general credit limit is $1,000. However, the company also offers Zip Money, a line of credit with higher limits, which can be used for larger purchases.
While currently sitting far below their 2021 peak of around $13, Zip shares are up 90% over the past year.
They are trading hands for $2.73 a share at the time of writing.
Is there further upside from here?
One fund manager remains optimistic about the buy now, pay later stock.
Fund manager Wilson Asset Management owns Zip shares in several of its listed investment companies (LICs). Specifically, WAM Capital (ASX: WAM), WAM Leaders (ASX: WLE), WAM Active (ASX: WAA), WAM Microcap (ASX: WMI), and Wilson Asset Management Leaders Fund.
Let's find out why.
Positive trading update
Last week, Zip released a trading update.
Management upgraded its FY25 EBITDA guidance by 5% to $160 million. This was driven by superior performance in the United States, where total transaction value (TTV) increased by 40% in the third quarter.
In a note last Friday, Wilson Asset Management noted that this was ahead of consensus expectations.
The fund manager also said:
Encouragingly, this acceleration has not been accompanied by material changes to credit losses, leaving Zip with capacity to further invest into U.S. marketing to drive net new customer acquisitions and support medium-term top-line (revenue) outlook.
How does Zip compare to other ASX growth shares?
Wilson Asset Management also noted that the company's momentum remains intact and that its valuation is undemanding relative to other ASX growth companies that have surged to record highs in recent months.
Since the Liberation Day dip, several ASX growth stocks have been on a roll. Life360 Inc (ASX: 360) has been a standout performer, rising 92% since April 7. Lovisa Holdings Ltd (ASX: LOV), Wisetech Global Ltd (ASX: WTC), and Pro Medicus Ltd (ASX: PME) have also done very well, increasing by at least 40% over the same time frame.
For comparison, the S&P/ASX 200 Index (ASX: XJO) has rebounded 16% over this period.
Wilson Asset Management sees further upside for Zip shares, despite the buy now, pay later stock increasing 38% in the past month.
What are brokers saying?
Earlier this week, The Motley Fool's James Mickleboro reported that Ord Minnett has retained its buy rating on Zip Shares with an improved price target of $3.40. The broker cited Zip's second guidance update in less than three months and the impact of falling interest rates on consumer spending as key reasons for this upgrade.
