Zip Co shares (ASX: ZIP) staged a sharp 9.37% recovery to close at A$1.75 on Wednesday, offering brief respite to shareholders nursing a punishing 47.76% decline since the start of 2026 following disappointing half-year results that sparked a near-40% single-day plunge last month.
The Zip share price closed at A$1.75, up 9.37% in what some are hoping is a potential support level forming around A$1.60. However, the bounce does little to offset the catastrophic losses suffered since February 19, when Zip released half-year FY26 results that sent the stock into freefall despite headline numbers showing strong growth. Year-to-date, shareholders remain underwater by nearly half, raising questions about whether Wednesday’s uptick represents genuine buying interest or merely a technical bounce in an ongoing downtrend.
Trading volumes accompanying the rise suggest some bargain hunters are willing to test the waters at current levels, though the share price remains well below its recent trading range. The key question facing markets is whether A$1.60 will hold as a floor, or whether further deterioration in sentiment could push shares to new lows.
Recent Financials Driving The Move
The company’s February 19 results painted a picture of robust top-line expansion paired with troubling margin compression, a combination that proved toxic for the share price. Total Transaction Value (TTV) climbed 34.1% to $8.4 billion, while total income rose 29.2% to $664 million. Cash gross profit advanced 33.5% to $314.3 million, and cash EBITDA surged 85.6% to $124.3 million. Net profit from continuing operations jumped 128% to $52.4 million.
Despite these impressive growth figures, markets focused laser-like attention on deteriorating unit economics. Revenue margin contracted from 8.2% to 7.9%, driven by the U.S. market now representing 75% of TTV, a geography with inherently thinner margins. Net bad debts ticked up to 1.7% of TTV from 1.6% previously, exceeding company targets and raising concerns about credit quality as the portfolio scales.
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Citi analyst Siraj Ahmed highlighted that U.S. net transaction margin declined from 3.7% to 3.1%, a material compression that suggests the growth story may be coming at the expense of profitability. Management’s guidance that second-half cash EBITDA would be “broadly in line” with the first half further disappointed markets expecting accelerating momentum.
In an attempt to stabilize sentiment and signal confidence, Zip announced an on-market share buyback program of up to $50 million, set to commence around March 6, 2026, and run for up to 12 months. The initiative aims to reduce shares on issue, potentially enhancing earnings per share while deploying what management characterizes as surplus capital.
CEO Cynthia Scott stated that the buyback “reflects a disciplined and balanced approach to capital management, aiming to maximize shareholder value while maintaining investment in growth and sustainable profitability.”
What Could Be Next?
The technical picture remains challenging. With shares down nearly 48% year-to-date, momentum indicators suggest oversold conditions that could support a near-term bounce. However, the absence of meaningful fundamental catalysts leaves the stock vulnerable to renewed selling pressure if operating metrics fail to improve.
The margin compression story is particularly concerning for markets accustomed to BNPL providers demonstrating operating leverage as they scale. Instead, Zip’s results suggest the opposite dynamic may be at play, growth requiring increasing investment in customer acquisition and credit provisioning, with margins under pressure from competitive intensity and geographic mix shift.
The buyback announcement, while supportive, may not be sufficient to reverse sentiment absent clearer evidence that the company can stabilize margins and bad debt metrics. Some analysts view the current valuation as potentially attractive for long-term investors willing to bet on management’s ability to right-size the business model, while others see further downside risk if second-half results confirm the stagnation implied by flat EBITDA guidance.
Bull Case:
- Strong 34% TTV growth and 86% EBITDA growth demonstrate underlying business momentum
- $50 million buyback signals management confidence and may provide price support
- Oversold technical conditions and potential A$1.60 support level could attract value investors
- U.S. market dominance positions company in largest BNPL geography globally
- Positive net profit demonstrates path to sustainable profitability unlike many peers
Bear Case:
- Revenue margin compression from 8.2% to 7.9% suggests deteriorating unit economics
- Net bad debts rising to 1.7% exceeds targets and threatens profitability
- Flat second-half EBITDA guidance implies growth stalling despite top-line expansion
- U.S. market mix shift driving lower margins may be structural headwind
- 48% year-to-date decline reflects broken market confidence requiring time to rebuild
Today’s 9.37% bounce will be welcome for ZIP bulls, but may offer little comfort to shareholders who have watched more than $1 billion in market value evaporate this year, and the jury remains out on whether current levels represent genuine value or merely a pause in a deeper correction. With margin pressure, rising bad debts, and flat earnings guidance clouding the outlook, markets may demand concrete evidence of operational improvement before confidence returns.
