Zip Co shares (ASX:ZIP) are capturing attention once again as it continues it’s rapid recovery, currently trading A$2.87, for a 5.9% gain on the day. This resurgence follows a period of volatility and strategic recalibration for the Buy Now, Pay Later (BNPL) firm. The stock has demonstrated resilience, carving out a V-shaped recovery trend that began earlier in the year.
The recent improvement in sentiment is underpinned by a significant catalyst: an upgraded FY2025 cash EBTDA guidance, announced on June 11th. The revised forecast, projecting a minimum of $160 million, significantly exceeded prior expectations of $153 million. This positive revision was directly attributed to impressive total transaction value (TTV) growth exceeding 40% year-on-year in the US market for April and May. The news triggered an immediate 19% surge in the share price, underscoring the market’s sensitivity to positive earnings signals.
A longer-term perspective reveals the nature of the reversal. While the year-to-date performance remains negative (-3.3%), reflecting earlier headwinds, the stock has soared 107% over the past year. This is indicative of the company’s strategic shift towards profitability and sustainable growth, particularly within the competitive US BNPL landscape. Since hitting lows in early April, Zip’s stock has more than doubled, demonstrating both the magnitude, and the speed of its recovery.
However, the path hasn’t been without its bumps. The departure of co-founder Larry Diamond in December 2024 initially caused a 4% dip in share price, highlighting the market’s sensitivity to leadership changes, even within established organizations.
The Q2 earnings miss, alongside declining revenue in ANZ and higher costs also set the stock back earlier in the year. A sharp reversal in sentiment, followed by such a rapid ascent is not an easy path to take, yet Zip shares seemingly continue back on the path towards A$3.
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As Zip approaches its next earnings report, analysts are generally optimistic, although some caution is warranted given the recent rally. The average price target of A$3.22 reflects a healthy perceived upside of more than 10% from current prices, although fundamentals will likely lead the next leg. The key question remains: can Zip sustain its current growth trajectory and meet its upgraded earnings guidance? The answer likely hinges on several factors, including the continued strength of the US economy, the competitive dynamics within the BNPL sector, and the company’s ability to maintain stable credit performance.
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