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Is the Zip share price crash a buying opportunity or a warning sign?

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A young couple look upset as they use their phones.

Yesterday, Zip Co Ltd (ASX: ZIP) shares have crashed following the company’s half-year FY26 results announcement.

At the close of the ASX on Thursday afternoon, Zip shares were 33.87% lower at $1.865 a piece.

Yesterday’s crash means the stock is now 42.97% lower for the year-to-date and 26.57% below where it was this time last year.

Why is the share price crashing today?

Zip delivered a record result but investors were spooked by a number of the company’s metrics. Zip’s revenue margin declined 7.9%, net bad debts increased slightly to 1.73% of TTV.

The company also said it expected its second-half cash EBITDA is expected to be broadly in line with the first half. This suggests that profit growth could moderate from here rather than accelerate.

What’s ahead for Zip this year?

While the results might have missed expectations, there are still plenty of positives ahead for the company for the remainder of the year.

Late last year Zip also made some significant progress in plans to broaden its product range and expand its global presence. The buy now, pay later (BNPL) provider announced that its US segment is expanding its partnership with programmable financial services business, Stripe, a move which caused investor panic at the time. 

Zip is still considering plans to tap into the US capital markets too in order to boost its presence among US-based investors. It is considering a secondary sharemarket listing on the Nasdaq to potentially drive opportunities for business expansion.

What do brokers think of Zip shares?

There haven’t been any confirmed broker rating updates for Zip shares yet, but we might see some analysts confirm or change their position on the stock over the next couple of days.

At the time of writing, analysts still hold a bullish outlook on Zip shares. And while the results announcement slightly missed expectations, the experts think there is much more upside ahead for the stock this year.

The latest data from TradingView shows that all 11 analysts currently have a buy or strong buy rating on Zip shares. The average target price is $5.31 a piece, which implies a 186.42% upside at the time of writing.

However, if the shares reach the maximum target price of $6.72 this year, it would translate to a whopping 262.26% upside at the time of writing.

Ahead of the earnings announcement, the team at UBS confirmed its buy rating on Zip shares and confirmed its $5.20 target price on the BNPL provider. Citi also holds a buy rating on the stock.

The post Is the Zip share price crash a buying opportunity or a warning sign? appeared first on The Motley Fool Australia.

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Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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