The Zip Co Ltd (ASX: ZIP) share price has been one of the best performers in the S&P/ASX 300 Index (ASX: XKO) over the past year, rising by more than 80%, as the chart below shows.
Past performance is not guaranteed to happen again; it would be very optimistic to assume that the share price will rise another 80% in the next 12 months.
The buy now, pay later company has benefited from an apparent resurgence in both consumer and investor confidence.
As the broker UBS pointed out, FY25 was a strong year for both Zip shares and its financials, with revenue growth of 24% year over year, gross profit growth of 34% to $509 million, and operating profit (cash EBTDA) growth of 147% year over year.
After seeing those numbers, let's look at whether this is the right time to buy Zip shares.
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More growth expected in FY26
The United States is increasingly important for Zip – it saw US active customers reach 4.3 million, with total transaction value (TTV) of $9.3 billion, compared to 2 million active customers across ANZ and $3.7 billion of TTV.
FY26 US TTV growth is expected to be more than 35%, in constant currency terms, with July 2025 TTV growth tracking in line with FY25 growth (of 43%). The company's revenue as a percentage of TTV is expected to be approximately 8%. These are strong numbers.
After seeing what Zip reported, UBS upgraded its revenue expectations for FY26, FY27, and FY28 by 4%, 5%, and 5%, respectively, to reflect "stronger US revenue assumptions and ANZ recovery." As a result of those changes, UBS' projections for Zip were lifted by 14%, 15%, and 12%, respectively, for FY26, FY27, and FY28.
UBS also noted that its long-term earnings forecasts for Zip were lifted by an average of 25% on the better US performance.
The broker said:
We see the US as the primary driver of growth for Zip over the medium term, with US consumer sentiment strong and retail spending resilient. Zip is pivoting to focus on broader and larger spend categories, such as Travel, Health and Electronics, amongst others, driving higher TTV/customer. We also saw new customer acquisition in the year, which coupled with potential upside from US rate cuts, paints a positive backdrop for US momentum. But engagement growth remains very strong, and this strong repeat customer activity is coming at low levels of bad debts which is assisting ZIP deliver margin expansion.
Zip share price target hiked
The broker decided to lift its price target on Zip by 32% to $4.50 because of the above upgrades over the next few years and the improved longer-term outlook. That implies a possible rise of 4.5% over the next year.
In FY26, UBS forecasts revenue growth of $1.3 billion and earnings before interest and tax (EBIT) of $69 billion. By FY30, it expects Zip's revenue to reach $2.4 billion and EBIT of $364 million.
If the Zip share price does rise 4.5%, that'd be positive, but plenty of other ASX shares may perform stronger.
