Zip shares (ASX:ZIP) fell 7.25% on Wednesday to close at A$2.43, sliding decisively below the 200-day simple moving average at A$2.57 that had underpinned sentiment for much of the past two months. The break pushed the stock’s one year loss to 41.3%, despite a 42.94% rally over the past six months. A true year of two halves for followers of ZIP.
Wednesday’s decline carried the stock through the closely watched 200-day SMA at approximately A$2.57, a level Zip had spent much of the previous eight weeks trading above. The close at A$2.43 leaves shareholders facing a 27.46% year-to-date decline and extends a history of sharp drawdowns. The stock also sits below its 50-day moving average near A$2.83–2.84, putting the stock in a bearish setup.
Fundamental Setup
The technical breakdown arrives against a backdrop of unusually strong fundamentals. Zip’s FY26 result delivered record cash EBTDA of A$268.9 million, up 57.9% year-on-year, while operating margin expanded to 20.0% from 15.8% in FY25. Total transaction volume rose 27.2% to A$16.7 billion, with US volumes up 42.5% in US dollar terms, and total income climbed 24.6% to A$1,347.4 million. Statutory net profit after tax increased 45.7% to A$116.4 million.
Credit metrics remained within management’s target settings, with net bad debts at 1.77% of transaction volume (versus 1.52% in FY25) and US bad debts at 1.73%, improving into the fourth quarter. The customer base grew to 6.5 million active users and the merchant network expanded to 97,400. Management has set an FY27 cash EBTDA target of A$340 million, a 26% uplift on FY26, and returned A$150 million to shareholders through buybacks alongside announcing a further A$50 million repurchase plan and new capital management initiatives.
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Technical Contrast
From a technical standpoint, the picture is fragile. Trading below both the 50-day and 200-day averages typically signals negative momentum, and the breakdown risks triggering further selling from momentum-driven strategies.
For contrarians, the flip side is that operational momentum with rapid US scaling, improving unit economics, contained credit costs and active capital returns is being priced as if it barely exists. If bond yields stabilise and arrears remain controlled, the conditions for a bounce are plausible, particularly given the buyback support.
Whether the move below the 200-day average proves to be a valuation reset worth buying, or the opening phase of a deeper de-rating as the credit cycle turns, will be told in time. For a stock that has added 76% off the 52 week low less than 6 months ago (+42.94% in 6 months), yet trades 41.3% lower over the past year, there remains plenty to keep both bulls and bears interested.
Bull Case:
- Record FY26 cash EBTDA up 57.9% with operating margin expanded to 20%.
- US transaction volumes grew 42.5%, supporting a scalable second growth engine.
- A$150m in buybacks plus fresh capital initiatives signal confidence in valuation.
- FY27 cash EBTDA guidance of A$340m implies 26% further earnings growth.
Bear Case:
- Rising bond yields squeeze warehouse funding costs and long-duration valuations.
- Bad debts rose to 1.77% of volumes as consumer credit risks build.
- Track record of violent drawdowns and fragile rallies amplifies breakdown risk.
