Why did Zip shares rebound 19% this week?

FY26 has been volatile for this ASX BNPL stock.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points
  • Zip's share price rebounded 19.3% this week, despite no price-sensitive news, following a period of profit-taking and external market influences such as negative sentiment related to US credit quality issues.
  • Zip's strong FY25 performance with a significant lift in transaction value and cash EBTDA, along with positive Q1 FY26 results, has supported its stock price, although recent market volatility and sector declines have impacted its shares.
  • Analysts maintain a positive outlook, with Zip shares rated as a strong buy by CommSec, and Macquarie and UBS analysts setting optimistic price targets of $4.85 and $5.40, citing potential growth from BNPL's US market penetration.

Zip Co Ltd (ASX: ZIP) shares have rebounded strongly despite no price-sensitive news out of the buy now, pay later (BNPL) company.

The Zip share price is $3.41, up 1% today, and up 19.3% since last Friday's close at $2.85 per share.

What is going on?

A young woman smiles as she rides a zip line high above the trees.

Image source: Getty Images

Zip shares zig-zag all over the place!

The Zip share price put in a great performance in FY25, rising 110% as the company's new strategy continued to bear fruit.

Zip decided three years ago to abandon its mass global growth strategy in favour of positive cash flow in just a few markets.

For FY25, Zip reported a 30.3% lift in total transaction value to $13.1 billion and a 147% lift in cash EBTDA to $170.3 million.

The company's operating margin almost doubled to 15.8%.

On 20 October, Zip provided a 1Q FY26 update, reporting record cash earnings of $62.8 million, up 98.1% year over year.

The operating margin was 19.5%.

On the day of the report, Zip shares rose 4.3% to $4.61, indicating that investors liked what they saw in the numbers.

The next day, 21 October, the ASX BNPL stock was killed with 9% erased from its market capitalisation.

On the same day, the S&P/ASX 200 Index (ASX: XJO) hit a new record at 9,115.2 points.

Between 21 October and 19 November, Zip shares plummeted 38% to a four-month closing low of $2.84 last Wednesday.

With no price-sensitive news from Zip during this time, it's likely that the stock's fall is attributable to profit-taking.

Pretty understandable given Zip shares had risen another 50% between 30 June and 20 October, building on their 110% gain in FY25.

Blackwattle portfolio managers, Robert Hawkesford and Daniel Broeren, say the Zip share price also fell due to negative sentiment over US credit quality, sparked by the collapse of sub-prime auto lender, Tricolor, amid fraud allegations, and other matters.

Meanwhile, other ASX 200 shares have also fallen since the benchmark index hit its peak.

The ASX 200 is down 5% since 21 October, with the financial sector down 8.2%.

As discussed in another article, all market sectors have experienced a fall since their historical sector high points in 2025.

Financials sit in the middle of the pack, down 9.7%. Materials have fared best, down 3.4%, while tech is the worst performer, down 24%.

Zip shares seemed to find support at about $2.85 apiece last week, and a strong rebound has ensued this week.

Expert tips for the Zip share price

Zip shares were upgraded to a 'strong buy' consensus rating on the CommSec platform in October.

Macquarie has just begun covering the stock. The top broker has a buy rating on Zip with a 12-month share price target of $4.85.

UBS has a buy rating on Zip shares with a more ambitious price target of $5.40.

In their latest update, Hawkesford and Broeren said they saw 'meaningful upside' ahead for the Zip share price.

… the underlying fundamentals and outlook for Zip remain strong and we see meaningful upside from both a re-rating of the stock and the ongoing penetration of BNPL products in the US which has a significant runway, sitting at only ~2% today, vs ~15% and ~20% in Australia and Europe respectively.

Motley Fool contributor Bronwyn Allen has positions in Zip Co. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on BNPL shares

A woman's hair is blown back and her face is in shock at this big news.
BNPL shares

3 reasons to buy Zip shares today

It's been a volatile start to the year for Zip shares, but it looks like some upside is coming.

Read more »

A man makes an online payment with his laptop and credit card.
BNPL shares

3 key reasons to buy Zip Co shares now

This ASX growth share has been sold down heavily. I think the balance of risk and reward now looks more…

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Share Market News

$10,000 invested in Zip shares 12 months ago is now worth…

And find out how much the shares could be worth this time next year.

Read more »

Happy woman shopping online.
BNPL shares

Buying Zip shares? Here's why the ASX BNPL stock is rocketing higher today

Zip shares are smashing the benchmark on Thursday. But why?

Read more »

A young man sitting at an outside table uses a card to pay for his online shopping.
BNPL shares

Down 55%: Should I buy Zip shares?

This company is no longer just a BNPL growth story.

Read more »

an exhausted shopper slumps on an outdoor seat with various coloured shopping bags either side of her.
Share Market News

What on earth's going on with Zip shares?

The volatility has been relentless and isn't ending anytime soon.

Read more »

A young woman looks happily at her phone in one hand with a selection of retail shopping bags in her other hand.
BNPL shares

Why Afterpay owner Block shares are looking undervalued

A top fundie expects strong growth from Block shares.

Read more »

A boy with sad eyes pulls the zip over his mouth and nose while doing up a large jacket where the collar stands up at head height.
BNPL shares

Zip shares sink after court loss. Is this ASX comeback stock in trouble?

Zip shares tumble after losing a major trade mark case.

Read more »