The Zip Co Ltd (ASX: ZIP) share price has suffered enormous volatility over the last six months, as the chart below shows. But, instead of being fearful, this could be the right time to look at the buy now, pay later business.
When valuations fall this hard, it can be a good idea to think about what might happen when market confidence returns.
While the market didn't love the recent FY26 half-year result from Zip, there were a number of positives, and some analysts are optimistic about what the business can achieve in the coming years.
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FY26
Broker UBS noted that the FY26 half-year result was a "slight miss" compared to estimates, but suggested that the Zip share price decline was "an overreaction, given US growth remains strong and whilst net bad debts had increased, this was not unexpected given Zip is now focusing on customer growth in the region and still within the comfort range of 1.5% to 2%."
UBS is forecasting that US total transaction value (TTV) could grow by 38% in the second half of FY26. The broker suggests that Zip's US growth is being driven by two things, which is ongoing growth of buy now, pay later in the US and a focus on predominantly non-discretionary verticals which are more resilient through economic cycles"
The broker estimates that its earnings per share (EPS) could rise at a compound annual growth rate (CAGR) of 30% over the next three years, which UBS thinks is attractive relative to buy now, pay later and banking peers.
Taking all of the above into account, UBS predicts that Zip's net profit could more than double in the 2026 financial year to $112 million.
FY27
The broker predicts ongoing profit growth in the 2027 financial year for the business, which could see the company deliver net profit of $151 million in FY27.
These ongoing improvements in profit are expected to be driven by strong growth in the US. UBS predicts US TTV growth of 30% in FY27 for Zip.
FY28
Two exciting things could happen for owners of Zip shares in the 2028 financial year.
Firstly, its net profit could rise again in FY28 to $199 million.
Second, the company could start paying a dividend to shareholders, starting with an annual payout of 8 cents per share in FY28.
The broker UBS is expecting the company's US division to deliver TTV growth of 22% in FY28.
FY29
The 2029 financial year could see the buy now, pay later business deliver even more profit progress.
UBS suggests the business could achieve a net profit of $259 million in FY29.
FY30
Finally, the business could achieve its most profitable year ever in the 2030 financial year.
The start of the 2030s could see the buy now, pay later business deliver net profit of $337 million, meaning profit may triple from the expected amount for the 2026 financial year.
