Zip Co Ltd (ASX: ZIP) shares enjoyed another month of outperformance in September.
Shares in the S&P/ASX 200 Index (ASX: XJO) buy now, pay later (BNPL) stock closed out August trading for $4.26. When the closing bell rang on 30 September, shares were changing hands for $4.42 each.
This put Zip shares up 3.8% over the month, well ahead of the 1.4% loss posted by the ASX 200 over this same time.
September's gains might pale in comparison to the 31.9% gains posted by Zip in August. But another month in the green saw the ASX 200 BNPL stock end September up an eye-popping 248% since the recent 8 April lows.
Here's what happened in the month just past.
Image source: Getty Images
Why did Zip shares outperform in September?
There was no price-sensitive news out from Zip over the month. But the ASX 200 stock looks to have gotten some support from expectations of another US Federal Reserve interest rate cut this month. BNPL stocks like Zip have proven to be very sensitive to lending rates.
And Zip also received plenty of positive analyst coverage in September.
Among them, Stephen Wood, portfolio manager of Eiger Capital's Australian Small Companies Fund.
Early in September, Wood said that despite the huge recent gains for Zip shares, he expected they could continue growing "materially".
"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," Wood said. "Zip's form of credit is different and differentiated in the US market."
Wood added:
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.
Zip is guiding to greater than 35% volume growth this financial year with increased margins.
Commenting on that growth outlook in late August, 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."
Is the ASX 200 BNPL stock destined for the ASX 100?
With the company's market cap surging along with the Zip share price, Zip rejoined the ASX 200 in June.
But its growth journey may not stop there.
In September, Wilsons Advisory forecast that Zip is likely to replace plumbing supplies company Reece Ltd (ASX: REH) on the S&P/ASX 100 Index (ASX: XTO) during the next quarterly rebalance. That could offer further tailwinds for Zip, as index-tracking funds mirroring the ASX 100 would then need to buy the stock.
As for October, halfway through the second trading day of the new month, Zip shares are changing hands for $4.60 apiece, up 4.1% since the September close.
