The Zip Co Ltd (ASX: ZIP) share price is catching the eye on Thursday.
In afternoon trade, the buy now pay later (BNPL) provider's shares are up 19% to 50 cents.
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Why is the Zip share price jumping?
Today's gain appears to have been driven by a reasonably positive broker note out of Citi this morning.
Although the broker has only retained its neutral (high risk) rating on the company's shares, it has boosted its price target materially.
According to the note, the broker has lifted its price target by 11% to 51 cents.
While this is broadly in line with where its shares trade at now, it was a 21.4% premium to where they finished yesterday's session.
What did Citi say?
Citi has been impressed with the company's performance in the United States. It notes that its growth in the key market is accelerating. The broker said:
The key highlight from Zip's recent trading updates has been the acceleration in US revenue growth while keeping loss-rates low.
In light of this, the broker has upgraded its earnings estimates. It also believes that the market may be underestimating its earnings potential. Citi adds:
We upgrade our cash EBTDA forecasts materially to reflect this and see upside risk to consensus. Zip has also made good progress on fixing its balance sheet and we expect it to be cash flow positive in 2H24e but still needs to renew its corporate debt facility (expires in Mar'24) and the Senior Convertible note still has ~$100 million left. Retain Neutral/High Risk (target price +11%).
The Zip share price is now up 25% since this time last week.
