The Zip Co Ltd (ASX: ZIP) share price has climbed more than 395% in 2024 to date, making it one of the best performers on the ASX this year. Shareholders and investors may be wondering what 2025 has in store.
When we're talking about returns of that magnitude, past performance is certainly not a reliable indicator of future performance.
However, it's clear the company's recent financial results have been stronger than what the market was expecting.
In this article, we'll examine what the buy now, pay later company is predicted to achieve and where the Zip share price could go next year.
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2025 projections
The broker UBS is projecting that Zip could grow its revenue to $1.11 billion. So, let's look at how the US could be instrumental in that revenue goal and influential on the Zip share price.
UBS noted that in the first quarter of FY25, US growth remained strong, with the average total transaction value (TTV) per customer up 38% and customer numbers rising by 140,000 quarter over quarter.
The broker suggested that it's too early to determine whether Zip is gaining market share compared to competitors, but broader buy now, pay later penetration remains "strong", and UBS is expecting a seasonally strong second quarter, which includes Black Friday and Christmas sales.
UBS saw US net bad debts rise 15 basis points (0.15%) quarter over quarter to 1.59% to support customer growth, but the broker said this is "benign" because it's at the low end of the 1.5% to 2% target range.
UBS is expecting US customers to grow by 0.25 million, but even that could be conservative considering Zip is delivering annualised customer growth of 560,000. There's also the potential of faster growth for TTV thanks to US rate cuts.
In Australia and New Zealand, in the first quarter, UBS noted that ANZ TTV's growth declined 3% year over year due to customer losses. UBS is expecting Australian TTV growth to be negative 1%, with an expected 0.1 million customers lost.
UBS expects Zip to continue focusing on its cash operating profit (EBTDA) margin, with cost control being integral to that. The broker is expecting the cash EBTDA margin to be 13% in FY25 and 17% in FY26.
Thanks to that, UBS is predicting Zip could make earnings before interest and tax (EBIT) of $64 million in FY25 and net profit after tax (NPAT) of $45 million.
Zip share price target
A price target tells us where the broker thinks the share price could be in 12 months from the time of the investment call.
UBS currently has a price target of $3.65 on the buy now, pay later business. That suggests a possible rise of 19% from today's level. The broker is optimistic today because it predicts Zip could make an NPAT of $286 million in FY29. That means Zip is trading at just 14x FY29's estimated earnings.
