The Zip Co Ltd (ASX: ZIP) share price has experienced significant volatility over the past year, as the chart below shows. It's good to think about what could happen next because the business is delivering growth in its financials.
Sometimes the market may be overly optimistic about the business, and sometimes it's pessimistic.
It's heavily tied into market and economic confidence because a significant part of its transaction value is linked to consumer discretionary spending.
Image source: Getty Images
What could happen with the Zip share price?
We should remember that analyst price targets are just estimates of where experts think the share price will be within a year, not guarantees that they will be met, of course.
According to CMC Markets, there have been six recent ratings on the buy now, pay later business over the past three months. All of them were buys!
The average price target for those six ratings is $3.57, suggesting a possible rise of nearly 50% over the next 12 months.
The most optimistic price target is $4.50, implying a potential rise of more than 80%, while the lowest is $2.60. That suggests a rise of 7%.
Why are analysts optimistic on the business?
The business continues to grow at a very strong rate.
Its latest update was for the company's FY26 third quarter, where it reported total income growth of 20.2% to $335.2 million following total transaction value (TTV) growth of 22.4% to $4 billion.
The cash net transaction margin (NTM) remained "strong" at 3.9%, which was flat year over year, and the cash operating profit (EBTDA) surged 41.5% to $65.1 million.
The US is the key region driving growth for the company. US TTV increased 29% to $3.05 billion, and US revenue increased 29.3% to $223.9 million.
In terms of active customers, there is diverging performance between the two core regions. US active customers increased 9% to 4.6 million, and ANZ active customers declined 7.4% to 1.9 million.
Considering the huge scale of the US market, it seems like there's plenty of growth to come in that country. However, the fact that the mature ANZ market is seeing declines is not ideal.
Zip share price valuation
According to the forecast on CMC Invest, the business is projected to generate 12.4 cents of earnings per share (EPS).
At the time of writing, the Zip share price is valued at just 19x FY27's estimated earnings. That may prove to be a great time to buy while investors are seemingly more negative right now.
