Zip Co Ltd (ASX: ZIP) share flew 20% higher on Wednesday, closing the day at $1.99 a piece.
The price hike marks a turnaround for the Australian financial technology company's shares after they plunged 19% in March alone.
The latest trading price means Zip shares are now down 41% for the year-to-date, but a huge 57% higher than this time 12 months ago.
The fintech company delivered a record result in February but missed expectations. Zip's revenue margin declined 7.9%, net bad debts increased slightly to 1.73% of TTV. Zip also said it expected its second-half cash EBITDA is expected to be broadly in line with the first half.
Investors were spooked by concerns about rising competition, slowing growth and margin compression and it caused a sharp sell-off.
It's just one of many headwinds which has faced the business over the past six months. The stock faced pressure from short sellers in late-2025, and investors taking their gains off the table after a huge mid-year price rally.
As a tech company, Zip has also been caught up in the recent sector-wide tech sell off. Rising concerns about the global impact of the war in the Middle East drove investors away from high-growth technology stocks and towards more stable assets.
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What caused the mid-week Zip share price rally?
There hasn't been any price sensitive news out of the fintech company recently to explain the sudden price surge. It's likely that the price hike is due to a combination of factors.
I'd expect that a major theme driving the share price higher is investors buying back into the stock amid a shift in sentiment. Analysts widely consider the tech stock to be undervalued and oversold, and it looks like investor sentiment has finally caught up.
Meanwhile, news that US President Donald Trump has reached a ceasefire agreement with Iran has renewed hopes that the Middle East conflict could resolve. As a result, we saw large gains across many sectors on the ASX on Wednesday, technology included.
There are great growth prospects for Zip this year which may also have boosted sentiment. In February, the company announced it is aggressively expanding its US presence by launching its new Pay in 2 product. Its US business now drives over 75% of its total translation volume. The new product allows consumers to split a purchase into two instalments paid over two weeks.
Zip is also pursuing a dual sharemarket listing on the Nasdaq in the US. This could potentially drive opportunity for business expansion.
How high can Zip shares go?
Last month I predicted that the buy-now-pay-later (BPNL) provider's shares could explode higher this year. Even after Wednesday's share price spike, Zip shares look like a bargain.
Analysts agree, and TradingView data shows all 11 analysts with a rating on the stock hold a consensus buy rating on Zip shares.
The average target price is $4.04, which implies a potential 102% upside at the time of writing. Others still think the stock could soar even higher, up another 164% to $5.27 within the next 12 months!
