Highlights

  • ZIP shares trading at $1.770 with a broker consensus price target of $3.79, implying approximately 114% upside.
  • Zip reported record 1H FY26 cash EBTDA of $124.3 million, up 85.6% year-on-year, with operating margin improving to 18.7% from 13.0% in the prior corresponding period.
  • The company announced a $50 million on-market share buyback program commencing March 2026, alongside upgraded FY26 guidance, reflecting growing management confidence in the earnings trajectory.

 

 

Zip Co Limited (ASX:ZIP) is traded at $1.770 pe share on 14 April, unchanged on the day on volume of 17.44 million shares — the highest volume trading day among the group of names under review. The company's market capitalisation stands at $2.24 billion. As per EODHD/Others, the broker consensus price target of $3.79 represents implied upside of approximately 114%, positioning Zip as one of the more compelling valuation gaps on the ASX among financial technology names. The high trading volume at the current price level reflects sustained retail and institutional interest in a stock that has captured significant attention through its earnings turnaround narrative. The BNPL sector broadly has experienced a dramatic re-rating from its 2021 peak, when competitor valuations reached extraordinary multiples driven by pandemic-era growth enthusiasm. Zip's current share price reflects the residual caution that pervades the sector, but brokers argue the operational fundamentals now on display are incompatible with the deep discount implied by the current market price.

Business Overview and BNPL Model

Zip Co operates a buy now, pay later platform primarily focused on the United States, which now accounts for 75% of total transaction volume, with additional businesses in Australia and New Zealand. The company allows consumers to make purchases and pay in instalments, generating revenue from both merchant fees and consumer interest charges depending on the product type. Zip's model has evolved considerably from its earlier phase, when rapid user and merchant acquisition was prioritised regardless of profitability. The current management approach is centred on disciplined underwriting, margin improvement, and return on capital — a structural shift that has produced the earnings results now coming through in the financial reporting.

1H FY26 Financial Results: Inflection Confirmed

Zip's first half results for FY2026 represent the most compelling evidence yet of the earnings inflection that brokers have been forecasting. Cash EBTDA reached a record $124.3 million for the half, up 85.6% on the prior corresponding period, driven by a meaningful improvement in operating margin to 18.7% from 13.0%. Total transaction volume (TTV) reached a record $8.4 billion, up 34.1% year-on-year, while total income increased 29.2% to $664.0 million. Transactions grew 20.2% to 54.9 million, and active customers increased 4.1% to 6.6 million. The revenue margin of 7.9% was slightly lower than the prior period's 8.2%, reflecting the higher weighting of the US business in the mix — US transactions typically carry a lower revenue margin than Australian products but are generating significant absolute dollar volume. Net bad debts came in at 1.7% of TTV, broadly in line with management targets. The cash gross profit increased 33.5% to $314.3 million, and the cash net transaction margin held steady at 3.8%.

Share Buyback and Capital Management Signal

On 20 February 2026, Zip announced an on-market share buyback program of up to $50 million, commencing around 6 March 2026 for a period of up to 12 months. The buyback will be conducted in accordance with ASX Listing Rules, with purchases capped at 10% of issued capital over the 12-month period and subject to a 5% premium cap above the volume-weighted average price. The announcement of a buyback is a significant capital management signal in the context of Zip's history. Companies typically authorise buybacks when management believes the share price materially undervalues the business and when the cash generation profile supports the use of capital for buybacks in preference to other investment opportunities. For a company that was managing capital tightly in its growth phase, this announcement communicates a level of management confidence in the earnings trajectory and balance sheet strength that analysts view as a positive structural development.

Guidance and Upcoming Catalysts

Zip upgraded its FY26 guidance following the record 1H results, reflecting the improved earnings visibility. The company is scheduled to release its 3Q FY26 results on 17 April 2026 and its full-year FY26 results, including the Appendix 4E, on 20 August 2026. These near-term reporting events represent potential catalysts for investors who believe the current price does not reflect the operational trajectory. Merchants on Zip's platform increased 10.5% to 90,600, and the continuing expansion of merchant acceptance is a key driver of future transaction volume growth.

Conclusion

Zip Co's 1H FY26 results provide substantial evidence that the company's transition from a loss-making growth business to a profitable, capital-disciplined financial technology company is well advanced. Record cash EBTDA, expanding margins, strong transaction volume growth, and a buyback program collectively paint a picture that analysts believe is materially at odds with a share price of $1.77. The broker consensus target of $3.79 implies the market has significantly underestimated the earnings power of a business that has undergone a genuine operational transformation, and the near-term reporting calendar provides multiple opportunities for that gap to begin to close.