The analyst team at Macquarie have run the ruler over Zip Co Ltd's (ASX: ZIP) results and thinks there's huge upside to be had from the fintech company.
Zip Co shares have been under pressure since the company reported its first half results in mid-February, but it's fair to say Macquarie analysts think the negativity is overdone.
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Underlying metrics looking good
So let's have a look at what was reported.
Zip Co reported record cash EBTDA of $124.3 million, up 85.6% on the previous corresponding period, and record total transaction volume (TTV) of $8.4 billion, up 34.1%. Active customers also increased by 4.1% to 6.6 million.
Revenue came in at $658.1 million, while net profit from ordinary activities was up 128% at $52.4 million.
Zip managing director Cynthia Scott said regarding the result:
Zip continues to increase profitability at scale, driving cash earnings growth of 85.6% and significant operating margin expansion during the half. Momentum accelerated across both markets, underpinned by continued strategy execution, deeper customer engagement, strong holiday trading and expanded channel partnerships. We continue to execute strongly on our US growth opportunity, with TTV and revenue up 44.2% and 46.4% respectively (in USD), with active customers up 9.7% (407k) year on year. We also expanded our Pay-in-Z offering, giving customers greater flexibility for everyday purchases by making Pay-in-2 available to all customers in February 2026. In ANZ, we delivered a 138.0% year-on-year increase in cash earnings, supported by revenue and Australian receivables returning to growth with continued adoption of Zip Plus.
Ms Scott said bad debts were in line with targets and the company completed its $100 million share buyback during the half.
She added regarding the outlook:
We are well-positioned to continue executing against our FY26 strategic priorities and delivering profitable growth at scale. Following a strong first half, Zip has upgraded its FY26 guidance for operating margin and cash EBTDA as a % of TTV while reconfirming its other target ranges.
Zip Co shares look cheap
Macquarie analysts have had a look at the result and said in a research note to clients that the company was deeply undervalued.
The Macquarie team said they were forecasting improvement for Zip in both the third and fourth quarters of the year.
They added:
Despite the reset in earnings on the back of moderated operating leverage as Zip invests for growth, we expect medium-term growth supported by Zip's attractive unit economics model.
Macquarie has a price target of $3.35 on Zip Co shares, compared with the current price of $1.69.
If achieved, that would constitute a 98.2% return. Zip Co was valued at $2.14 billion at the close of trade on Tuesday.
