The Zip Co Ltd (ASX: ZIP) share price has seen enormous volatility since the beginning of April 2025, as the chart below shows. I think it's a good idea to consider whether the buy now, pay later business is a good investment right now or not.
Zip has a sizeable presence in both ANZ and the US, which are two of the best places for the business to operate, in my view.
Zip has made a lot of progress over the years, and its potential future growth could be one of the best reasons to consider the business, according to the broker UBS.
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Positives about Zip shares
The latest update from the business was its FY26 first quarter which showed top-line momentum in the US and a strong cash operating profit (EBTDA) margin outcome, according to UBS.
The broker noted that Zip's US total transaction value (TTV) and revenue accelerated further – in US dollar terms, it grew TTV by 47%, up from 45% growth in the fourth quarter of 2025. This was supported by customer growth of 12% year-over-year, prompting Zip to upgrade its estimate for US TTV growth to more than 40%, up from growth of more than 35%.
UBS suggested the strength in the first quarter of FY26 would mean a strong second quarter, considering the larger customer base and "continued proof of engagement" through the metrics of spending per customer, higher average order value (AOV) and frequency. That bodes well for Zip shares.
The broker says that ANZ metrics – portfolio yield, excess spread and net transaction margin (NTM) – are strong and UBS is predicting a catch-up of receivables growth from here.
Negatives
On the negative side of things, Zip saw its operating expenditure growth accelerate to 18% in the first quarter of FY26.
The buy now, pay later business is also seeing its US loss rate increase. Even so, UBS said that "a pickup in this metric makes sense given greater growth from new customers (vs existing and re-activated dormant customer) and is still at a comfortable level balancing growth and profitability."
There's also a general question of whether some investors may want to own part of a buy now, pay later business. I also think it could be somewhat vulnerable in the next financial recession in Australia and the US, considering how many customers it has now and how some payments could be delayed.
Is the Zip share price a buy?
UBS thinks so, with a buy rating on the company. The broker's price target on the buy now, pay later business is $5.40. That implies a possible rise of 64%, which would be a very compelling return over the next year, if that happened.
