Shares in Zip Co Ltd (ASX: ZIP) have been on a wild ride.
At the time of writing, the buy now, pay later (BNPL) stock is up an impressive 52% over the past month. Zoom out, though, and the picture gets more mixed, down 38% over six months, but still up 43% over the past year.
So, is this just another spike, or could there be more upside ahead for Zip shares? Here are three reasons some investors are getting bullish.
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Strong results and upgraded guidance
Zip gave the market plenty to like with its Q3 FY26 results, released earlier this month.
The company delivered record cash EBTDA of $65.1 million, marking a 41.5% increase year on year. Growth wasn't limited to profitability either. Total transaction volume climbed 22.5%, while total income rose 20.2%. That kind of across-the-board momentum matters for Zip shares.
Even better, management didn't just celebrate the quarter; it lifted expectations. Zip upgraded its FY26 group cash EBTDA guidance to at least $260 million and reaffirmed its broader targets for the year.
In other words, the company isn't just performing well; it's confident the momentum can continue.
US growth story gaining traction
Zip's expansion in the US is shaping up as a major growth driver.
The company expects US transaction volume to jump more than 40% in FY26, a standout figure in a competitive market. At the same time, group operating margins are forecast to remain above 18%, suggesting growth isn't coming at the expense of profitability.
That's a key point. BNPL players have often been criticised for chasing growth at any cost. Zip's latest numbers indicate it may be finding a better balance. It's scaling up while maintaining credit quality and margin discipline.
If that trend holds, it could significantly strengthen the investment case for Zip shares.
Analysts see up to 122% upside
Broker sentiment is firmly on the side of Zip shares.
According to TradingView data, 11 analysts currently rate the stock as a buy or strong buy, a clear vote of confidence in its outlook.
And the price targets are just as eye-catching. The average target sits at $3.83, implying potential upside of around 57% from current levels. Some analysts are even more optimistic, with the highest target coming in at $5.40. That points to a possible 122% gain over the next year.
Of course, price targets aren't guarantees. But they do highlight how much room some experts believe Zip shares still have to run.
Foolish Takeaway
Zip shares have already staged a strong rebound, but the combination of solid earnings growth, expanding US operations, and bullish analyst sentiment suggests the rally might not be over.
As always, volatility is part of the package with high-growth stocks like Zip. But for investors comfortable with the risks, this could be one to keep firmly on the watchlist.
