Zip Co Limited (ASX: ZIP) shares have staged a strong rebound, driven by improved financial performance and renewed investor interest. The stock remains high-beta and volatile, with market attention focusing on its turnaround potential.

( Image: ACB News)

█ ｜By ACB News / Jane

Zip Co Limited (ASX: ZIP), a leading player in the Buy Now, Pay Later (BNPL) sector, has gained renewed attention after a significant surge in its stock price. The fintech company, which operates Zip Pay and Zip Money services, provides interest-free short-term payment solutions for consumers and charges service fees to merchants. Zip’s primary markets include Australia, New Zealand, and the United States, positioning it as a key global BNPL provider.

After months of declines earlier this year, Zip Co’s stock recently made a notable rebound. On May 7, the stock surged by 13%, closing at 1.825 AUD, marking the highest price of the day and positioning it as one of the standout performers among Australian technology stocks.

Volatile Price Movements: A High-Beta, High-Volatility Stock

Zip Co’s stock is characterized by significant volatility, with sharp fluctuations in its price reflecting cyclical trends in the secondary market. This is indicative of its high beta coefficient (β), meaning it is highly sensitive to market movements.

Looking at Zip’s historical stock performance, we see striking price volatility. In March 2020, during the initial pandemic-induced market panic, the stock dropped to 1.05 AUD. However, during the period when the BNPL sector was highly favored by the market, Zip’s stock skyrocketed, peaking at 14.53 AUD in February 2021, a more than tenfold increase.

Despite the rapid growth, the BNPL sector experienced a dramatic decline, triggered by tightening regulations and growing concerns over persistent losses in many companies, including Zip. As a result, Zip’s stock price entered a prolonged downtrend, reaching an all-time low of 0.26 AUD in October 2023—down over 98% from its peak.

However, the market has since shown signs of recovery. Between November 2023 and December 2024, Zip’s stock price surged once again, peaking at 3.56 AUD. This rally echoed the gains seen in the early days of the pandemic, and Zip demonstrated its resilience with another significant surge in early 2025, though the price has since retreated to the 1.08 AUD range before steadily climbing.

Third-Quarter Report: Record Earnings and Positive Outlook

Zip’s recent third-quarter financial results for the 2025 fiscal year, ending March 31, revealed strong growth across key metrics. Quarterly cash EBITDA reached 46 million AUD, a 219.4% increase year-over-year, setting a new record. Total transaction volume (TTV) reached 3.3 billion AUD, up 35.7%, while total revenue grew by 26.5% to 278.9 million AUD.

Reflecting the solid performance, Zip revised its full-year cash EBITDA forecast upwards from a minimum of 147 million AUD to at least 153 million AUD, signaling confidence in its second-half outlook. 

Regionally, Zip's U.S. business has proven to be a growth engine, with TTV reaching 1.48 billion USD in the third quarter, a 40.2% increase, and revenue rising 44.1%. The company’s U.S. customer base grew to 4.18 million, with monthly customer attrition rates remaining well within the company’s risk tolerance. 

In contrast, the Australian and New Zealand markets showed more stability, with TTV rising by 12.6% to 894.5 million AUD, though revenue declined slightly by 1.3% to 103.1 million AUD. Active customers in the region fell by 6.8% to 2.07 million, while merchant numbers rose 9.6% to 58,700. 

Looking Ahead: Can Financial Recovery Underpin Valuation? 

Zip’s recovery, fueled by improving operational and financial performance, has led to a more optimistic market outlook. Analysts are forecasting a positive trajectory for Zip’s stock over the next 12 months. TipRanks sets a target price of 3.18 AUD, representing a significant upside from the current price of 1.62 AUD, while TradingView projects a higher target of 3.64 AUD.

Recent price movements may reflect speculative activity, with some investors potentially starting to build positions or re-entering the market after selling at higher levels during the stock's previous surge. The sustainability of this rally will depend on trading volume and capital flows. In the medium term, Zip’s ability to maintain its market share and meet its profitability targets will be key factors influencing its future trajectory.

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