Zip shares have been left for dead more times than a budget smartphone.
Yet quietly, Zip Co Ltd (ASX: ZIP) is starting to look less like a fallen fintech and more like a leaner, battle-hardened survivor.
With Zip stocks still a long way off former highs – 75% lower than 5 years ago – investors are being offered a rare second chance.
Here are three reasons the buy now, pay later (BNPL) company deserves a fresh look.
Image source: Getty Images
The business has finally grown up
Zip's wild growth-at-any-cost era is over. Management has slashed costs, exited loss-making markets and sharpened its focus on profitability. The result? A business that looks far more disciplined than it did two years ago.
Operating expenses are down sharply, bad debts have stabilised, and Zip is now consistently generating positive cash flow in its core regions.
Consensus forecasts indicate EPS rising 27% to 7.9 cents in FY26, followed by a further 53% increase to 12.1 cents in FY27. This is not speculative optimism. It signals a company that has moved beyond survival and is now beginning to demonstrate clear operating leverage.
In a market that now rewards earnings over hype, this reset matters. Investors no longer need to believe in blue-sky forecasts. Zip shares are showing tangible progress, quarter by quarter.
The American dream is still alive
While Australia is solid and steady, the real prize remains the US. Zip has carved out a niche as a flexible, app-based BNPL provider that sits somewhere between credit cards and short-term instalments.
Importantly, it has stayed in the US while several rivals have pulled back or collapsed. That gives Zip shares more room to grow without burning cash. As consumer spending stabilises and interest rates edge lower, US volumes are starting to improve.
If Zip can scale this market while keeping losses tight, earnings leverage could be powerful.
Valuation leaves room for upside
Zip shares are still trading at a fraction of their pandemic-era highs, currently at $3.10, after hitting $12.35 in February 2021. But the market may be underestimating how different the company looks today.
With a cleaner balance sheet, improving margins and a clearer path to sustained profitability, Zip doesn't need heroic growth assumptions to justify a higher valuation.
Even modest revenue growth, paired with tighter costs, could translate into outsized earnings gains. For investors willing to tolerate volatility, that risk-reward balance is starting to look attractive.
According to Trading View data, brokers are more than upbeat. Most of them rate Zip shares a buy or strong buy. They also see plenty of room for growth, with the average 12-month price target set at $5.36. This points to a 73% upside.
