( Image: ACB News)

█ ｜By ACB News  Stock Market Editorial Team

Zip Co Limited (ASX: ZIP), a leading Australian BNPL (Buy Now, Pay Later) fintech company, saw its share price jump more than 20% last week following the release of an upgraded earnings outlook and a strong trading update for May 2025.

The company now expects to deliver FY25 cash EBTDA of at least A$160 million, up from its previous forecast of A$153 million. The revised guidance reflects continued operational momentum, particularly in the U.S. market.

Solid May Trading Results Fuel Optimism

According to the company’s announcement, Total Transaction Volume (TTV) continued to grow across both Australia and the United States, with U.S. TTV increasing more than 40% year-on-year (in USD terms). Credit performance remained stable, with no material deterioration in loss metrics observed since Q3 FY25.

Zip also confirmed that it has repurchased 12.3 million ordinary shares, valued at A$22.6 million, under its on-market buyback program of up to A$50 million.

Group CEO and Managing Director Cynthia Scott stated that the company’s strong performance “reflected the resilience of our business model and disciplined execution of our strategy.”

Market Confidence Reignited as Shares Rally

Zip’s upgraded guidance triggered renewed market enthusiasm, with its share price closing at A$2.67 on Friday, representing a weekly gain of over 20%. This follows a recovery from a mid-April low of A$1.08, marking a rebound of nearly 150%.

As previously reported by ACB News, Zip had already lifted its FY25 EBTDA guidance in April from A$147 million to A$153 million. The most recent upgrade reaffirms the company’s trajectory toward its two-year strategic targets, initially outlined in February 2025.

Zip's High-Beta Profile Reflects Broader Sector Cycles

Zip’s share price history highlights the stock’s high volatility and sensitivity to broader sector dynamics. In March 2020, amid the early panic of the COVID-19 pandemic, Zip shares fell to A$1.05. However, as the BNPL sector surged in popularity, the stock rebounded sharply, rising more than tenfold to reach A$14.53 by February 2021. Peer company Afterpay experienced an even more dramatic trajectory, climbing from A$8 to A$160 within a year.

The sector's rapid ascent was followed by a swift and severe correction, triggered by tightening regulatory scrutiny and growing concerns over persistent losses. Zip’s stock, in particular, experienced a steep decline—plunging over 98% from its peak to a low of A$0.26 by October 2023.

This extreme volatility illustrates the cyclical nature of investor sentiment toward emerging fintech business models, where speculative momentum can quickly give way to valuation compression.

Zip Shares Surge: A New Round of Re-Rating Underway?

Between late 2023 and end-2024, Zip staged a dramatic recovery, with its stock climbing from A$0.26 to A$3.56, echoing its earlier pandemic-era rally. While the share price pulled back in early 2025, the recent rebound and upgraded guidance have reignited speculation of a valuation re-rating.

As ACB News analysts noted in a prior report 《Zip Co (ASX: ZIP) Rebounds Sharply — Is the Momentum Sustainable?》:

“Zip’s turnaround narrative reflects both the cyclical nature of fintech growth stocks and investor reappraisal of risk-adjusted upside.”

Further, in ACB News’ May feature 《Looking Ahead: Can Financial Recovery Underpin Valuation?》, analysts flagged substantial upside potential for the stock:

“Analysts are forecasting a positive trajectory for Zip’s stock over the next 12 months. TipRanks set a target price of A$3.18, while TradingView projected a higher target of A$3.64, compared to the then-current price of A$1.62.”

At the time, the report noted that 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. It cautioned that the sustainability of any rally would depend on trading volume and capital flows, while in the medium term, Zip’s ability to maintain market share and meet its profitability targets would be key to determining its longer-term trajectory. The latest earnings upgrade and market response may offer some early validation of this view, though structural challenges within the BNPL sector persist.

ACB News will continue to monitor developments at Zip Co and broader trends across the BNPL and fintech sectors.

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