Zip Co Ltd (ASX: ZIP) shares finished the week on a high note.
Shares in the S&P/ASX 200 Index (ASX: XJO) buy now, pay later (BNPL) stock closed up 4.66% on Friday, trading for $4.49 apiece.
That puts the stock up 112% since this time last year.
Investors who channelled their inner Warren Buffett to be greedy when others are fearful, and who bought the ASX BNPL stock at its one-year closing lows on 7 April, will be doing even better.
Zip shares closed at $1.19 on 7 April, with the stock now up a blistering 277.3% since then. Or enough to turn a $10,000 investment into $37,731. In just five months.
Now you might think that after such a tremendous run higher, that Zip's bull run may be running out of puff.
But Stephen Wood, portfolio manager of Eiger Capital's Australian Small Companies Fund, begs to differ (courtesy of The Australian Financial Review).
Image source: Getty Images
Why this fundie is bullish on the surging ASX 200 BNPL stock
Asked which stock in his fund has the most near-term upside potential, Wood pointed to Zip shares.
"Although it has run very hard, we believe Zip Co has the potential to be materially bigger with its rapidly growing franchise in the United States," he said. "Zip's form of credit is different and differentiated in the US market."
According to Wood:
It's attracting customers who find its features better than the banks – those who frankly don't want to deal with a bank and whose persona don't fit traditional bank criteria. Thanks to the gig economy, this customer segment is only growing and buy now, pay later is an attractive form of consumer finance for many people.
As for that growth outlook, Wood said, "Zip is guiding to greater than 35% volume growth this financial year with increased margins."
What's driving Zip shares higher?
Zip reported its full-year FY 2025 results on 22 August.
In FY 2025, Zip's total transaction volume (TTV) increased by 30.3% year on year.
Atop the 35% FY 2026 TTV guidance growth that Wood mentioned above, the company also upgraded the FY 2026 outlook for its operating margin to between 16.0% and 19.0%. That's up from 15.8% in FY 2025.
Commenting on the outlook, Zip CEO Cynthia Scott said:
We are well placed to deliver on our refreshed FY26 guidance and next horizon of growth, as we execute our strategic priorities of growth and engagement, product innovation, and platforms for scale, and fulfil our purpose of unlocking financial potential, together.
Zip shares closed up a whopping 20.2% on the day the company reported.
