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Highlights
- Zip Co shares surged from AU$0.40 to AU$3.39 in a year, up 748%, outperforming the ASX 200’s 20% growth.
- Strong Q1 FY25 results fueled growth, with U.S. earnings up 234% year-over-year.
- Elvest Fund managers see a long growth runway, particularly in the U.S. BNPL market.
Zip Co Ltd (ASX ZIP) has been the standout performer on the S&P/ASX 200 Index (ASX:XJO) over the past year. Shares of the buy now, pay later (BNPL) company have skyrocketed 748%, climbing from AU$0.40 to AU$3.39. This extraordinary rally far outpaces the broader ASX 200, which has gained 20% during the same period.
To put this into perspective, a AU$5,000 investment in Zip shares a year ago would now be worth a staggering AU$42,625.
Although Zip remains far from its February 2021 peak of AU$12.35 per share, it has firmly established itself as the best-performing ASX 200 stock of the last 12 months.
Can the Momentum Continue in 2025?
Top fund managers Adrian Ezquerro and Jonathan Wilson from Elvest Fund believe Zip’s rally is far from over. The fund, which boasts a strong track record with a 46.7% return since inception, highlighted Zip as a key driver of its recent success. In November alone, Zip shares gained 13.3%, contributing significantly to the fund’s monthly return of 5.5%.
Ezquerro and Wilson are optimistic about Zip’s potential, especially in the U.S. market. They note that BNPL penetration in the U.S. is just 2%, compared to 15–20% in markets like Australia and the U.K., providing a significant growth runway.
Key Drivers of Zip’s Success
Several factors have propelled Zip’s remarkable growth, with falling interest rates in the U.S. playing a major role. Lower rates have enhanced market sentiment and supported Zip’s expansion in its key U.S. division, where Q1 FY25 results were exceptional.
In the first quarter of FY25, Zip reported:
- Group cash earnings of AU$31.7 million, up 234% year-over-year.
- Total transaction value (TTV) in the U.S. rose by 42.8%.
- U.S. revenue increased by 43.9%, driven by engagement in higher-margin channels like its app.
CEO Cynthia Scott attributed the success to Zip’s growing foothold in the U.S.:
“Our U.S. business continued to deliver outstanding growth, with TTV up 42.8% and revenue up 43.9%, versus 1Q24, driven by ongoing engagement in higher-margin channels such as the App.”
The Road Ahead
Looking forward, fund managers and analysts expect Zip to maintain its upward trajectory. Falling U.S. interest rates and the potential for rate cuts in Australia in 2025 are likely to benefit the company. Additionally, Zip’s expanding market share in the U.S. and its robust earnings growth metrics provide a solid foundation for future performance.
With BNPL adoption still in its early stages in the U.S., Zip’s management and investors are optimistic about the company’s ability
