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Key Highlights:
- Zip Co’s share price up 450% since January, turning $1,000 into $5,500.
- Impressive earnings and 43.9% growth in US revenue drive investor optimism.
- UBS and Ord Minnett raise price targets, signaling further upside potential.
Zip Co Ltd (ASX:ZIP), the Australian buy now, pay later (BNPL) provider, continues its remarkable performance, posting another impressive gain of 13% in November. This latest rise in the share price marks another period of market-beating returns for Zip's shareholders, outpacing the solid 3.4% gain seen in the ASX 200 index during the same period.
Zip's share price surge has been extraordinary, with the stock now up a staggering 450% year-to-date. To put this into perspective, an investment of $1,000 at the start of the year would now be worth approximately $5,500. This monumental gain has attracted significant attention from investors and analysts alike.
Key Drivers Behind Zip’s November Surge
Several factors contributed to Zip’s strong performance in November, starting with the company’s first-quarter update for FY 2025. The update, which was released at the end of October, provided investors with a clear indication of the company’s robust growth trajectory. Zip’s earnings before tax, depreciation, and amortization (EBTDA) surged by 233.7% year-on-year, reaching $31.7 million. Notably, this figure represents almost half of Zip’s full-year EBTDA from FY 2024, signaling significant progress in the company's financial performance.
The standout performance came from Zip’s US business, which reported a 42.8% year-on-year increase in total transaction volume (TTV), reaching US$1.3 billion. This was reflected in a 43.9% increase in US revenue, which climbed to US$92.1 million. The growth was attributed to Zip’s ongoing success in engaging customers through higher-margin channels, such as its mobile app. CEO Cynthia Scott highlighted that this impressive growth demonstrates the US business’s strong trajectory and its expanding presence in the competitive BNPL market.
Analysts React Positively
The strong financial update was met with enthusiasm from analysts. UBS, for example, reaffirmed its buy rating on Zip and raised its price target by 49%, from $2.45 to $3.65. Even after November’s strong gains, UBS’s new target suggests that Zip’s shares could have further upside potential of approximately 7%.
Similarly, Ord Minnett praised Zip's performance, maintaining its buy rating and increasing its price target to $3.60. The analysts are particularly impressed with Zip’s growing market share in the US and its ability to generate higher-margin revenue streams.
Outlook and Future Expectations
In addition to the positive earnings report, Zip held its annual general meeting last month. While there were no major announcements, management provided an optimistic outlook for the future, which further bolstered investor confidence. With a growing presence in the US and a strong start to FY 2025, Zip looks set to continue its upward trajectory.
