Is it too late to buy Zip shares at their 2-year highs?

Thinking long-term remains the key decision factor.

| More on:
A cute young girl stands with her chest thrust out as she zips up the zip of a shiny pink jacket she is wearing.

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

Zip Co Ltd (ASX: ZIP) shares have seen a dramatic turnaround in the last 24 months. After bottoming to multi-year lows of 28.5 cents apiece in October last year, the stock has now rallied to trade at $1.78 at the time of writing – its highest mark in two years.

In fact, Zip shares have spiked by 330% over the past 12 months, making them one of ASX's top performers in that time.

With this surge, investors are questioning whether it's too late to join the Zip bandwagon. Is it? Let's see what the experts think.

What's driving Zip shares higher?

Zip shares notched new multi-year highs of $1.82 apiece at Tuesday's close. This is their highest since February 2022, as seen in the chart below.

Created with Highcharts 11.4.3Zip Co PriceZoom1M3M6MYTD1Y5Y10YALL26 Feb 202210 Jul 2024Zoom ▾May '22Sep '22Jan '23May '23Sep '23Jan '24May '24Jul '22Jul '22Jan '23Jan '23Jul '23Jul '23Jan '24Jan '24www.fool.com.au

This surge follows a significant turnaround in the company's strategy and performance. Over the past year, Zip has pivoted from aggressive growth to a focus on profitability, which has been well-received by the market.

The company's results for Q3 FY24 showed a 14.6% year on year increase in total transaction volumes (TTV) to $2.4 billion. More than 43% growth in transaction volumes came from the US alone.

Looking ahead, I see the company's performance in the US market – where it has shown significant growth – as a key area to watch.

Additionally, the exit of Apple from the buy now, pay later (BNPL) market in the USA saw another buying thrust in Zip shares.

Is it too late to buy Zip?

Experts are divided on whether it's too late to buy Zip shares at their current highs.

UBS and Ord Minnett both rate the BNPL company a buy, setting price targets of $1.55 apiece. Notably, this is below the current share price on Wednesday.

But, both brokers acknowledge that investors should consider the risks associated with BNPL stocks, especially in a higher interest rate environment.

The consensus from CommSec also suggests a positive outlook, with four out of eight firms rating Zip as a buy.

The outlook on buying Zip shares also depends on several personal factors, including (but not limited to) long-term investment goals, personal risk tolerances, and current financial position.

The decision to buy a stock or not shouldn't be solely based on price movement, either. Business fundamentals are what matter over the long run.

So, for those investors with a long-term view, an appraisal of the company's long-term prospects – rather than month-to-month movements in its share price – is more appropriate.

In that vein, depending on your answers to the above points, it may or may not be too late to buy ZIp shares.

Foolish takeaway

Zip shares have delivered stellar gains in the past year, with a 330% increase. While the company's strategic shift towards profitability and the exit of a major competitor has boosted its prospects, remember to conduct your own thorough due diligence.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Apple and Zip Co. The Motley Fool Australia has recommended Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on BNPL shares

Business people discussing project on digital tablet.
BNPL shares

$10,000 invested in Zip shares in FY 2025 is now worth

Let's see how this payments company's shares performed in the last financial year.

Read more »

a woman with lots of shopping bags looks upwards towards the sky as if she is pondering something.
BNPL shares

Why this fund manager remains bullish on Zip shares

Zip shares have surged 90% over the past year.

Read more »

A cool dude looks back at the camera while ziplining above the treetops.
BNPL shares

Zip share price rockets 19% on full-year earnings upgrade

Surging again today, Zip shares are now up 127% since their recent April lows.

Read more »

a young woman looks happily at her phone in one hand with a selection of shopping bags in her other hand.
BNPL shares

Up 87% since April, why the Zip share price can keep flying higher into 2026

A leading fund manager expects more outsized gains from Zip shares ahead.

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Share Gainers

Guess how much $10,000 invested in Zip shares on 7 April is worth today!

The rebound in the Zip share price since 7 April has been nothing short of remarkable.

Read more »

Frustrated and shocked business woman reading bad news online from phone.
BNPL shares

Why is the Zip share price dropping today?

Let's see how this buy now pay later provider performed in April.

Read more »

A young woman smiles as she rides a zip line high above the trees.
BNPL shares

How Zip shares rebounded 45% from their 7 April lows to beat the ASX 200

Did you catch what happened with Zip shares in April?

Read more »

A young woman in a shop hands her credit card to the cashier.
BNPL shares

Up 41% in 3 weeks, should I buy Zip shares today?

Zip shares have been on a tear in April. Now what?

Read more »