Here's what brokers think about the Zip (ASX:Z1P) share price

The Zip Co Ltd (ASX: Z1P) share price is bouncing back on Friday following a selloff yesterday. In early afternoon …

| More on:
Graphic illustration of buy now pay later technology overlaid on blurred photo of businessman on tablet

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Zip Co Ltd (ASX: Z1P) share price is bouncing back on Friday following a selloff yesterday.

In early afternoon trade, the buy now pay later (BNPL) provider's shares are up 3% to $7.19.

This appears to have been driven by a reasonably positive response to its update by brokers this morning.

How did brokers respond?

One of the more positive brokers was Morgans. This morning the broker retained its add rating but trimmed its price target to $8.57.

Based on the latest Zip share price, this implies potential upside of 19% over the next 12 months.

It commented: "Zip Co's 4Q21 update showed continuing strong growth momentum across the group, with key metrics increasing ~13%-14% sequentially. With growth trends broadly reasonable, the size of the share price weakness (-8%) on the day was somewhat of a surprise, in our view. However, we do note factors including no comment on recent media speculation of potential corporate interest in Z1P and some rise in arrears."

What else was said?

Analysts at Ord Minnett are similarly positive on the quarterly result and the Zip share price.

This morning the broker retained its accumulate rating but cut its price target down to $10.50. This implies potential upside of 46% over the next 12 months.

According to the note, the broker was pleasantly surprised by the performance of its US QuadPay business. It notes that it has exceeded its expectations four quarters in a row now.

QuadPay added over 600,000 new customers during the quarter, which was 1.6% higher than the broker was forecasting. Also beating Ord Minnett's expectations were Zip's total transaction value (TTV) and average spend per customer. They came in 6% and 4% higher, respectively, than what its analysts were expecting.

One broker thinks the Zip share price is overvalued

However, not all brokers are positive on the Zip share price at the current level.

A note out of UBS reveals that its analysts have retained their sell rating and lowly $5.60 price target. This implies potential downside of 22% over the next 12 months.

Contrary to Ord Minnett's views, Zip underperformed UBS' expectations in the US during the quarter, with QuadPay's revenue falling over 10% short of its forecasts. Outside this, the broker continues to have concerns over execution risks and costs.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended ZIPCOLTD FPO. 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 Bruce Jackson.

More on Share Market News

Senior man wearing glasses and a leather jacket works on his laptop in a cafe.
Broker Notes

Should I still swap my CSL for CBA shares or has the market corrected?

The two stocks have travelled opposite directions this month.

Read more »

Man with rocket wings which have flames coming out of them.
Resources Shares

Why Macquarie expects this ASX All Ords copper stock could surge 38%

With costs coming in below expectations, this ASX All Ords copper stock could rocket higher over the coming months.

Read more »

woman holding 'hiring' sign in shop
Broker Notes

Can you guess whether Macquarie prefers REA Group, CAR Group or SEEK shares?

Which ASX online classifieds business offers the best investment opportunity today?

Read more »

An ASX shares broker analysing a chart tracking the A2 Milk share price
Share Market News

Are these two struggling ASX materials shares undervalued?

Are these buy-low candidates?

Read more »

Female miner smiling in front of a mining vehicle as the Pilbara Minerals share price rises
Broker Notes

Expert says this ASX All Ords small cap mining stock could rocket 38%

Big upside ahead?

Read more »

Happy man working on his laptop.
Share Market News

5 things to watch on the ASX 200 on Wednesday

It looks set to be another good session for Aussie investors tdaoy.

Read more »

Two laughing young women hold shopping bags and ride an escalator up to another level in a Scentre Group shopping centre.
Broker Notes

3 ASX consumer sector shares to buy in July: expert

A leading expert has named its top 3 picks.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Broker Notes

Broker says WiseTech shares can hit $135

Bell Potter has good things to say about this rebounding tech stock.

Read more »