Shares of Zip Co. surged more than 25% on Friday, reaching their highest level in over three years, after the buy-now-pay-later company reported a sharp rise in annual earnings and unveiled plans for a secondary listing in the United States.
The stock climbed as much as 25.6% to A$3.92 in early trade, its strongest level since January 2022 before closing at 20% higher A$3.75.
Zip was also the top performer on the ASX 200, which fell 0.3% on the day.
The rally extends a dramatic turnaround for the stock, which has risen more than six-fold since the end of 2023 after being battered by weak consumer spending and regulatory scrutiny in prior years.
Profits jump on strong US momentum
Zip’s cash earnings before tax, depreciation and amortization more than doubled to A$170.3 million in the year to June 30, surpassing analyst expectations of A$160 million.
The result was underpinned by its US business, where total transaction volume climbed 41.6%, fueled largely by spending on non-discretionary categories such as groceries, healthcare, and education.
The company also reported improved asset quality, with net bad debts falling to 1.5% of transaction volume, compared with 1.7% a year earlier.
Zip expects momentum to continue, forecasting US transaction volume growth of more than 35% in fiscal 2026.
Analysts at Citi said that projection, alongside modest revenue growth in Australia, points to cash earnings of around A$230 million this fiscal year, comfortably ahead of consensus estimates.
Dual listing planned to tap US investor appetite
The company said it is exploring a secondary listing on Nasdaq while retaining its primary listing in Sydney, a move it expects will broaden its investor base and support growth in its most important market.
“Dual listing will support Zip’s significant growth opportunity in the US, which now represents more than 80% of divisional cash earnings,” the company said in a statement.
It added that interest from American investors has grown sharply in recent months.
Chief executive Cynthia Scott told the Wall Street Journal that large US institutions were eager for greater exposure.
“Having that listing in the US, that dual-listing, enables and facilitates their investment,” she said.
Major US fund managers including State Street, Vanguard, Merrill Lynch and BlackRock already hold a combined 16% stake in Zip’s Australian-listed stock.
Investors drawn to non-discretionary focus
Scott said Zip’s role as a cash-flow management tool for consumers underserved by traditional credit providers had become a key attraction.
“Our business is largely a non-discretionary business,” she said. “Enabling everyday Americans to do cash-flow smoothing in an uncertain macroeconomic environment is a real asset that we’ve got and one that’s certainly recognized.”
Revenue from Zip’s US business rose 44% to US$424.8 million in the year through June, with transaction values up 42%.
In contrast, revenue in Australia was broadly flat. The number of active users in the US climbed 11% to 4.3 million, compared with around 2 million active users in Australia, or about 10% of the adult population.
Profit rebound underscores recovery
Zip posted a net profit of A$79.9 million for the year, a sharp reversal from just A$3.7 million in the prior year.
Its market capitalization stood at about US$3.07 billion following Friday’s share-price surge, though the stock remains well below its February 2021 peak.
The company is forecasting further margin improvements in the coming year alongside continued expansion in its US operations.
With transaction growth accelerating in its largest market, Zip is positioning itself to consolidate gains from the global resurgence in consumer demand for flexible payment solutions.
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