Zip Shares (ASX: ZIP) Continue To Rally as BNPL Regulations Shift

Buy Now, Pay Later (BNPL) provider Zip Co shares (ASX: ZIP) enjoyed a significant boost today, climbing 6.39% as new regulations governing the BNPL sector in Australia come into effect. The stock closed at $2.33, reflecting a continuation of the upward trend observed over the past week and month, and push the company back beyond a $3B market cap. This rally comes after a period of significant volatility for Zip earlier in the year, underscoring both the opportunities and risks associated with the company.

The implementation of new regulations classifying BNPL providers in Australia as Low Cost Credit Contracts (LCCCs), became effective today. This regulatory shift mandates that BNPL companies like Zip hold a credit license and adhere to obligations under the National Consumer Credit Protection Act, mirroring the requirements for traditional credit providers. Market analysts believe that this increased regulatory oversight will level the playing field, improve consumer protection, and enhance the overall credibility of the BNPL sector. The perception is that these changes will weed out less responsible players, leaving stronger, more compliant companies like Zip to thrive.

The recent performance of Zip shares paints a picture of a company in recovery mode. While the stock experienced a sharp decline of over 60% through the first few months of 2025, it has since rebounded strongly, gaining doubling in value off the lows of April 7th. Over the past week, Zip shares have risen by 19.18%, and over the past month, the increase has been even more impressive, at 27.32%.

Despite the positive momentum, analysts caution that Zip’s fortunes remain closely tied to global consumer confidence, particularly US consumer spending. The company’s significant exposure to the US market makes it vulnerable to economic headwinds such as tariffs and federal cost reductions. Investors are keenly awaiting the release of Zip’s June 2025 quarter numbers, which are expected to provide critical insights into the impact of these factors on the company’s earnings. Any signs of weakness in transaction volume or profitability, especially from the US business segment, could quickly dampen investor enthusiasm.

Technical analysis suggests that Zip is currently trading above its short-term and medium-term moving averages, supporting the positive momentum. However, some analysts warn that the rapid ascent of the stock may be followed by a correction, urging investors to exercise prudent risk management. The wide range of analyst price targets for Zip, from a minimum of $1.80 to a maximum of $4.67, further underscores the elevated risk and potential reward profile of the stock.

This divergence in opinion reflects the uncertainty surrounding the future of the BNPL sector and Zip’s ability to navigate the evolving regulatory landscape and competitive pressures.  The new BNPL regulations in Australia may boost consumer confidence, but analysts will be watching closely to see how the company performs. The average price target of $3.03 reflects further perceived upside in ZIP from the analyst community, with the prevailing view seemingly indicating there is more room to run. With targets being rapidly changeable however, you can not rely on these in their entirety but more for clues as to how sentiment is shifting.

The upcoming earnings report will be particularly important to gauge the true impact of the new regulations and whether the boost in sentiment will translate to actual gains. The market will be looking to see if transaction volumes and profitability have been positively affected by the regulatory changes.

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