Zip Co Ltd (ASX: ZIP) shares have been among the strongest performers on the ASX over the last six months, rising by around 180%, as the chart below shows.
The buy now, pay later business is benefiting from a number of tailwinds including falling interest rates, improving consumer sentiment and strong business momentum.
Zip's FY25 result was strong, with the company reporting total transaction value (TTV) growth of 30.3% to $13.1 billion, income growth of 23.5% to $1.08 billion and cash operating profit (EBTDA) growth of 147% to $170.3 million. The cash EBTDA growth was stronger than analysts were expecting thanks to a great FY25 fourth quarter.
The business is making good progress in FY26 and this bodes well for earnings growth in the current financial year, all the way to FY30.
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FY26
Broker UBS was impressed by the recent Zip FY26 first quarter update, with strong momentum in the US and an impressive cash EBTDA outcome. The buy now, pay later business increased its outlook for US TTV growth in FY26 to more than 40%, up from guidance of more than 35%.
This "sets up Zip well for the seasonally stronger" second quarter thanks to the larger customer base and improving metrics such as spend per customer and frequency. However, there was an acceleration of operating expenditure growth to 18% year-over-year, as well as a higher US loss rate, though the cash EBTDA of $63 million was stronger than expected.
Turning to the financial forecasts, UBS is projecting revenue of $1.36 billion and net profit of $86 million in FY26.
FY27
Following the strong performance of Zip in the US, UBS upgraded its expectations.
UBS is now forecasting that Zip could generate $1.62 billion of revenue in FY27 and $154 million of net profit, implying profit wouldn't be far off doubling in a year.
FY28
The 2028 financial year could be even better for Zip shares because of the ongoing projected rise of the company's profits.
In FY28, UBS projects Zip's revenue could climb to $1.89 billion and net profit could reach $227 million.
FY29
The 2029 financial year could see further improvement of the business, which could be a very good tailwind for the Zip share price in the coming years.
FY29 could see the business generate $2.20 billion of revenue, while net profit could increase to grow to $306 million.
FY30
The 2030 financial year is predicted to be the best year of all from this series of projections.
In FY30, UBS forecasts that Zip could reach approximately $2.54 billion of revenue – close to double what it's expected to achieve in FY26.
With that revenue generation, the company could make $385 million of net profit in FY30.
UBS currently has a buy rating on the buy now, pay later business. It has a price target of $5.40 on the Zip share price, which implies a possible rise of 17% (at the time of writing) over the next year.
