Zip Co shares (ASX: ZIP) have fallen to a key technical support level at A$1.60 at the close, extending a dramatic selloff that has wiped approximately A$2 billion from the buy-now-pay-later provider’s market capitalisation since the start of 2026.
The Zip share price closed 6.14% lower on Thursday, retreating to the A$1.60 level that has provided intermittent support during the sharp pullback. Over the past month, ZIP shares have collapsed 38.27%, with the year-to-date decline now sitting at 52%. The dramatic reversal marks a stunning fall from grace for a stock that rallied approximately 180% through 2025, reaching near A$4.90 in early December before the wheels came off.
The selloff accelerated violently on 19 February 2026, when Zip released its first-half FY26 results. Despite reporting solid underlying earnings of approximately AU$0.0408 per basic share and cash earnings growth of roughly 85% year-over-year, the stock collapsed nearly 40% intraday to a low of A$1.72. Trading volume spiked to more than 166 million shares, compared with a typical daily average of around 15 million, signalling widespread capitulation among institutional and retail holders alike.
Behind The Move
The February earnings report revealed a company that had achieved the critical milestone of structural profitability at scale, yet failed to deliver the forward momentum markets had priced in. Management’s guidance for the second half of FY26 implied flat or only modest earnings growth, a significant disappointment for a stock trading on elevated growth expectations. Several key metrics, particularly around US market expansion, missed analyst forecasts, feeding a narrative that Zip’s turnaround story may be stalling just as it appeared to gain traction.
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The company’s A$100 million on-market share buyback, completed around the time of the results, initially signalled management confidence in intrinsic value. However, with shares now trading roughly 50% below the levels at which much of that capital was deployed, the timing has drawn criticism from some market participants who question whether those funds might have been better preserved for balance sheet strength or growth investment.
On the product front, Zip announced the launch of “Pay in 2” in the US market on 5 February 2026, a new payment option allowing consumers to split purchases into two instalments over two weeks. The initiative targets what the company describes as “underestimated Americans,” reinforcing its strategy of serving alternative and near-prime borrowers. While the product diversification demonstrates continued innovation, it has done little to offset concerns about the pace of US customer acquisition and transaction volume growth.
The broader Australian buy-now-pay-later sector continues to evolve, with industry research projecting approximately 17-18% growth in transaction value for 2026. However, the market’s tolerance for unprofitable growth has evaporated, replaced by a focus on sustainable unit economics and positive cash generation. Zip has been positioned as one of the clearest examples of this profitability pivot, with rapidly improving margins and disciplined credit underwriting.
The Technical Setup
The current A$1.60 price level represents more than just a round number. It marks a zone where ZIP found support during earlier periods of scepticism about BNPL viability, and technical analysts note that the recent volume suggests forced selling may be nearing exhaustion. The question now is whether this represents a post-panic base from which the shares can rebuild, or simply a pause in a longer-term de-rating.
Market sentiment remains deeply divided. Bulls point to the structural profitability inflection, improving unit economics, and the likelihood that the selloff overshot fundamental deterioration. The company’s buyback at higher prices, while poorly timed in hindsight, reflects management’s long-term conviction. Bears counter that growth expectations, particularly in the US, now justify a lower multiple, and that Zip’s history of volatility makes it unsuitable for risk-averse capital.
Bull Case:
- Structural profitability achieved with 85% cash earnings growth year-over-year demonstrating operating leverage
- Massive 50% decline likely overshot fundamental deterioration creating asymmetric upside opportunity at support
- A$100 million buyback signals management confidence; sector consolidation favours disciplined survivors like Zip
Bear Case:
- Second-half guidance implies stalling growth momentum particularly in critical US market expansion
- High volatility and 40% single-day crash eroded institutional confidence in management execution credibility
- BNPL sector re-rating from growth to mature fintech justifies permanently lower valuation multiples
