Zip Co Ltd (ASX: ZIP) shares are flat at $3.15 a piece at the time of writing on Tuesday afternoon. Over the past month the shares have dived 10.5%, wiping some of the 35.2% gains made over the past 6 months. For the year-to-date Zip shares are 6.06% higher.
It's clearly been a year of ebbs and flows for the Australian financial technology company. But right now I think the stock is a screaming buy. Here's why.
Image source: Getty Images
1. Zip has had strong and improved earnings this year
The buy-now-pay-later (BNPL) provider delivered record profitability amid macroeconomic uncertainty in FY25.
In the first quarter of FY26, the company said that its total transaction value grew 38.7% to $3.9 billion and income was up 32.8% to $321.5 million. Meanwhile, net bad debts were flat at 1.6% of TTV, and the cash operating profit grew by 98.1% to $62.8 million.
At its annual general meeting (AGM) last month, the company also said it is on track for its full-year FY26 results and plans to be within all target ranges previously announced in August.
2. The company is pushing for growth
The Australian financial technology company has operations in Australia, New Zealand, and the United States and provides customer service in 12 countries.
Zip now offers point-of-sale credit and digital payment services to consumers and merchants via interest-free BNPL technology. The company currently has two consumer products: Zip Money and Zip Pay.
But the business is also actively broadening its product base beyond traditional BPNL options too. In late October, the company announced that its US segment is expanding its partnership with Stripe, a programmable financial services business.
Zip is looking at ways to scale its US business too. Zip management has said that the company is still considering a secondary sharemarket listing in the US which would reduce dependence on Australian markets and potentially introduce more opportunity for business expansion. A dual listing on Nasdaq which could help the business tap into US capital markets and boost its valuation among US-based investors.
3. The outlook for Zip shares looks bullish
I think there is still some opportunity for more momentum ahead for Zip shares.
Analysts are bullish on the shares too. TradingView data shows 8 out of 10 analysts have a buy or strong buy rating on Zip shares. The minimum target price is $4.85 while some analysts think that Zip shares could reach as high as $6.20 over the next 12 months. At the time of writing that implies an upside as high as 96.5% for investors.
Macquarie analysts initiated coverage of the Australian financial technology company in late October, saying it expects Zip to deliver rapid growth going forward. It has an outperform rating and $4.85 target price on Zip shares. The broker also listed Zip shares among its list of best ASX stocks to buy amid a rising interest rate environment.
UBS currently has a buy rating on Zip shares, but a higher price target of $5.40. That implies a possible rise of approximately 71.4% over the next year. The team was particularly impressed by stronger-than-expected earnings growth last quarter.
