Zip Co Shares Surge Nearly 16% as Buy Now, Pay Later Lender Rides Post-Election Rally and Steady Buyback Push

Shares of Zip Co Ltd. climbed nearly 16% on Thursday, making the buy now, pay later provider one of the strongest gainers on the Australian market as investors piled into growth and consumer-facing stocks following Democrats' sweeping U.S. midterm victories.

Zip shares rose 29 cents, or 15.68%, to close at A$2.14, after trading between A$1.96 and A$2.20. About 37.6 million shares changed hands, well above the stock's recent average, valuing the company at roughly A$2.7 billion.

The move came on a strong day for the broader market. The S&P/ASX 200 closed up 2.61% at 9,065.1 points, its highest level since early September.

Macro tailwinds

Zip did not release new trading figures Thursday, and analysts linked the rally largely to global developments. Investors welcomed the outcome of the U.S. midterm elections, with Democrats gaining control of Congress and potentially placing greater constraints on government policy, while oil prices fell sharply amid hopes of easing conflict in the Middle East.

The U.S. outcome matters for Zip because most of its growth now comes from America. The U.S. now represents the majority of Zip's group transaction volume, according to recent company disclosures.

Lower fuel costs could also help Zip's customers. Oil prices fell more than 8% overnight to their lowest in more than two months.

Buyback continues

Zip has also been steadily buying back its own shares. The company reported purchasing 1,602,280 shares on Nov. 4 under its on-market buyback program, bringing total repurchases since the program began on Aug. 20 to 14,822,720 shares.

Guidance maintained despite fraud hit

Thursday's gain extends a recovery from a difficult October. After a sharp sell-off last month, Zip shares entered November at around A$1.79.

The selloff followed the company's first-quarter update, which included an unusual cost. The fraud involved coordinated individuals who used legitimate credentials to open accounts and complete transactions that were not repaid, and Zip tightened controls that slowed U.S. transaction volumes and customer additions in July and August.

The numbers still showed underlying growth. Zip increased first-quarter fiscal 2027 transaction volume by 18% to A$4.6 billion across the group, with the U.S. division lifting volume by 34.1%. Group cash EBTDA reached A$65 million, including A$10.1 million of fraud-related operating costs.

Management stood by its targets. Zip maintained its fiscal 2027 guidance for A$340 million in group cash earnings before tax, depreciation and amortization.

Credit quality in focus

Bad debts remain a key watch point. U.S. bad debts reached 1.93% of transaction value, the upper end of Zip's 1.5% to 2.0% target range, though the company expects the ratio to decline in the second quarter.

Analysts see value despite the risks. Morningstar maintains an A$3.50 fair value estimate and describes Zip shares as materially undervalued, while warning that fraud, funding costs and regulation remain risks.

Expanding merchant network

Zip continues to add retail partners in the U.S. The company recently announced its payment services are available in Best Buy stores across the United States.

Still well off highs

Despite Thursday's surge, Zip shares remain roughly 43% lower than a year ago. In August, the stock jumped to A$3.05 after the company reported record full-year cash earnings and upgraded its outlook.

The next scheduled checkpoints are Zip's second-quarter update and half-year results.