Zip shares have halved over the past year, but the analyst community has not budged an inch.
Every broker covering the company still rates it a buy.
What's more, the average price target implies the shares roughly doubling from here.
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Why brokers are so bullish on Zip shares
Zip Co Ltd (ASX: ZIP) closed Tuesday at $2.31, down 2.94% on the day.
Shares have fallen 49.12% over twelve months and 25.84% year to date. The 52-week range runs from $1.37 to $4.93.
All twelve analysts covering the company hold a buy or strong buy rating.
The average target of $4.56 implies around 95% upside, and the most bullish sits at $6.03.
UBS has reiterated a buy rating with a $4.70 target, pointing to the defensive qualities of the buy now, pay later model in weaker economic conditions.
The FY26 result behind the call
The numbers are part of the reason the brokers have not capitulated.
Zip delivered record cash EBTDA of $268.9 million in FY26, up 57.9%.
Total revenue rose 24.7% to $1,336.1 million and total transaction value climbed 27.2% to $16.7 billion.
Net profit after tax increased 45.7% to $116.4 million.
The margin story is arguably more important than the growth.
Operating margin expanded from 15.8% to 20.0% in a single year.
The company also completed $150 million of buybacks and announced a further $50 million for FY27, with available cash and liquidity of $246.5 million.
Group chief executive Cynthia Scott put the result in context:
Consistent execution has built the platform to deliver our next phase of growth and innovation. In FY26, we exceeded our targets with record cash earnings of $268.9m, up 57.9%, underpinned by material cash earnings growth in both markets. We maintained strong unit economics, expanded operating leverage and reinforced the value of our differentiated business model.
The United States is the whole story
Importantly for Zip, the American business now generates roughly two-thirds of group revenue.
Transaction volume and revenue both grew more than 42% there in local currency terms.
Active United States customers rose 9.3% to 4.65 million.
The Australian and New Zealand business is going the other way, with customer numbers down 8% to 1.88 million.
Management is winding down the New Zealand operation entirely to concentrate on Australia.
Guidance for FY27 calls for group cash EBTDA of $340 million, up around 26%.
The operating margin target is 20% to 22% and United States transaction volume is expected to grow more than 30%.
Zip is also weighing a share consolidation and a possible dual listing on the Nasdaq.
What has gone wrong for Zip shares
The share price fall has very little to do with the accounts.
Three things have worked against it at once.
The first is a broad sell-off in technology and high-multiple names.
The second is competition, with the buy now, pay later market crowded and margins under permanent scrutiny.
The third, and perhaps most important, is interest rates.
Zip lends money to consumers, which makes it geared to household health in both directions.
Consumer sentiment fell 5.2% in September to 84.4, with nearly two-thirds of consumers expecting mortgage rates to rise within a year.
All four major banks now forecast another rate rise before the end of 2026.
Foolish takeaway
The bull case for Zip shares is not overly complicated.
Earnings are growing fast, margins are expanding and the United States business is scaling.
The bear case is that none of that has been tested through a true consumer downturn. Only time will tell for Zip shares.
