Zip Co Ltd (ASX: ZIP) shares have closed the day flat at $2.43 a piece on Thursday afternoon.
This mens that Zip shares have recovered 68% of their value after dropping to an annual low in late-March. The shares are now also 41% higher than the trading price this time last year.
Brokers think the buy-now-pay-later (BNPL) provider’s shares can keep flying even higher over the next 12 months, too.
According to TradingView data, there is a buy consensus among all 11 analysts. The average target price of $3.83 implies a 57% upside at the time of writing. But others are even more bullish and are tipping the shares to soar another 121% to $5.40 each.
Here are three reasons why.
1. Zip shares are massively oversold
Zip shares have lost 50% of their value since peaking at a multi-year high in October last year, most likely the result of investors taking gains off the table after a strong share price rally.
The shares also suffered pressure from short sellers in late-2025. Following its first-half FY26 results in mid-February, its value crashed another 43% within one week.
In that result, the fintech company missed expectations, despite delivering a record result.
Zip’s revenue margin declined 7.9%, net bad debts increased slightly to 1.73% of TTV. Zip 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.
Investors were spooked by concerns about rising competition, slowing growth and margin compression.
Zip shares are now widely considered to be trading below fair value after being oversold.
2. Growth has accelerated
Despite missing expectations, Zip’s financial results have been robust over the past few quarters. Its latest third-quarter FY26 results announcement in mid-April showed that growth has started to accelerate.
Zip reported a 22.4% year-on-year increase in its total translation volume (TTV), a 20.2% increase in total income, a higher operating margin of 19.4% and confirmed it has grown its active customer base by another 3.5%.
The latest update also saw the fintech business upgrade its FY26 group cash EBTDA guidance to at least $260 million, from previous guidance of approximately $248.6 million, and reaffirmed all key target ranges for the year.
US transaction volume is forecast to rise over 40% in FY26. Meanwhile group operating margins are expected to remain above 18%.
3. It’s expanding aggressively in the US
It’s not only financial growth driving the business forward either. Zip is rapidly expanding its product range in effort to expand its global presence, especially in the US.
Late last year, the company announced that its US segment is expanding its partnership with programmable financial services business, Stripe, a move which caused some investor panic at the time.
In early February the company confirmed it is aggressively expanding its US presence by launching its new Pay in 2 product. The new product allows consumers to split a purchase into two installments paid over two weeks.
Zip is also pursuing a dual sharemarket listing on the Nasdaq in the US. This could also help to drive even opportunity for business expansion in the area.
The post Prediction: Zip shares could fly another 121% higher appeared first on The Motley Fool Australia.
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More reading
- 4 ASX 200 stocks rated a strong buy with an upside over 50%
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- Up over 70% in a month, is it too late to buy Zip shares?
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.