Zip Co Soars 54% as Strategic Shifts Ignite BNPL Comeback

Zip Co (ASX:ZIP) has emerged as one of the most striking performers in the Australian stock market this year, with its shares soaring 54% in April 2025 amid a dramatic turnaround in investor sentiment. The rebound follows months of turbulence for the buy-now, pay-later (BNPL) pioneer, which had seen its stock slump 34.6% in March amid concerns over rising U.S. tariffs and macroeconomic headwinds. Now, a combination of robust financial results, strategic market expansion, and disciplined capital management has reignited investor confidence.

The Catalysts Behind the Surge
At the core of Zip’s resurgence is a sharp improvement in its financial performance. In Q1 2025, the company reported a 36% year-on-year jump in quarterly total transaction value (TTV) to $3.3 billion, with revenue rising 27% to $279 million. A standout figure was its cash EBITDA, which surged 219% to $46 million compared to the prior period. This operational turnaround allowed Zip to upgrade its FY25 guidance, projecting cash EBITDA of at least $153 million—up from its earlier target of $147 million.

The buy-now, pay-later provider’s success hinges on its U.S. expansion, which now accounts for a growing share of its business. U.S. TTV rose over 40% year-on-year in Q1, offsetting a modest 1.5% dip in its home markets of Australia and New Zealand (ANZ). Management emphasized that securing new merchant partnerships and optimizing funding structures are central to its growth strategy. “The U.S. market is where we’re seeing the most momentum,” said a Zip spokesperson, noting partnerships with major retailers during peak sales periods.

Buybacks and Balance Sheet Strength
Zip’s $50 million share buyback program has also played a role in boosting investor sentiment. By April, the company had repurchased 3.9 million shares worth $6.4 million, reducing supply and signaling confidence in its valuation. This move aligns with its broader capital management discipline: operational expenditure growth is now capped at 10% in cash terms for FY25, while debt repayment has been bolstered by recent equity placements.

Credit performance remains stable, with no material changes reported in the U.S. or ANZ markets. This stability, combined with improved net transaction margins (NTM), has drawn praise from analysts. Citi and RBC Capital Markets recently upgraded their forecasts, citing Zip’s “strong U.S. momentum” and cost controls. However, risks persist: Citi warned that targeting new U.S. customers could lead to higher bad debt, a concern that will require close monitoring as interest rates in Australia and New Zealand remain elevated.

The Path Forward
Zip’s April rebound underscores its ability to pivot in a volatile sector. Its focus on high-margin transactions—driven by app-based services and strategic merchant alliances—has been critical. Meanwhile, the company’s FY25 targets, including the $153 million EBITDA goal, suggest a sustainable path forward. Yet challenges linger, including macroeconomic uncertainty and intensifying competition from rivals like Afterpay and Klarna.

Conclusion
Zip Co’s 54% stock surge in April 2025 marks a pivotal moment for the BNPL leader. With U.S. TTV growth outpacing expectations, disciplined capital management, and a reinvigorated guidance framework, the company has positioned itself to capitalize on its market opportunities. However, the path to sustained success hinges on navigating risks such as rising bad debt in the U.S. and the lingering impact of higher interest rates.

The data tells a compelling story: Zip’s cash EBITDA nearly tripled year-on-year, while its U.S. business now drives over 40% of TTV growth. These metrics, paired with a $50 million buyback program and a strengthened balance sheet, suggest the company is on firmer ground than it was a year ago. For investors, Zip’s April rebound offers both hope and a reminder—the BNPL sector’s winners will be those that balance aggressive growth with disciplined risk management.

As the sector matures, Zip’s ability to execute its U.S. strategy while mitigating credit risks could determine whether this surge is a fleeting rebound or the start of a new growth chapter.