Zip Co Shares Bounce as Broker Backing and Buyback Offset US Fraud Hit

Zip Co's stock is clawing back ground after Friday's heavy sell-off, with bargain hunters, fresh broker endorsements and a buyback update combining to lift the Australian buy-now-pay-later provider. The shares were up around 13% in pre-market trading, with other reports putting the gain at 14% following the previous session's slump.

At the heart of the rebound is a debate over whether the fraud incident disclosed in Zip's US business represents a contained hit or points to deeper problems with customer vetting. The company has moved to draw a line under the episode, saying the matter is under control, that it has notified the authorities and that it has lodged an insurance claim. Whether — and to what extent — that claim produces a payout has yet to be settled, so the cost remains embedded in the reported numbers for now.

Brokers Step In After the Rout

UBS argues the scale of Friday's decline was overdone and has reiterated its buy rating, even as it trimmed its forecasts. The broker carries a price target of A$4.05. Macquarie reaffirmed its own buy call yesterday with a target of A$3.50, while Ord Minnett confirmed its buy recommendation today and set a target of A$3.10.

The split between immediate fraud fallout and longer-term earnings prospects is what the analysts are trading on. Their optimism is not an all-clear, however: UBS's reduced projections show the incident has also taken a bite out of business expectations. UBS additionally points to a valuation of eleven times expected earnings. Zip, for its part, reported purchases of its own shares on-market under its existing buyback programme, a disclosure that further supported sentiment without addressing the operational consequences of the fraud.

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Growth Marches On Beneath the Charges

Zip published first-quarter figures for fiscal 2027 on Friday. Transaction volume climbed 18% to A$4.6 billion, while revenue reached A$376.1 million — evidence that the fraud struck a business still expanding rather than one with shrinking payment flows.

The fraud case generated A$10.1 million in cash operating expenses during the quarter. Cash EBITDA came in at A$65.0 million, up 3.4%; absent the charge, the metric would have stood at A$75.1 million. That gap captures the tension running through the stock: the platform is growing, but investors must now weigh higher losses and extra costs against that growth. Expansion alone does not answer the question of how effective controls really are.

Zip said a limited external fraud case in the US weighed on transaction volume and new-customer growth in July and August. The company described the incident as contained, yet the consequences were concrete, hitting both business development and costs.

Loss Rates Take Centre Stage

Net losses rose to 1.97% of transaction volume from 1.65% in the prior-year quarter. Management expects a lower US loss rate in the second quarter than in the first — an expectation that has become pivotal. A declining rate would reinforce the view that the damage is contained; until then, the confirmed buy ratings sit alongside genuinely higher losses.

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What has not changed is the full-year anchor. Zip reiterated its fiscal 2027 guidance of A$340 million in group cash EBITDA, which would represent growth of 26%. That confirmed target is the central counterweight to unease over the US incident and the mainstay of the bullish analyst case. Notably, the rally is not built on any upgrade to expectations — Zip had already reaffirmed its annual forecast in the quarterly report.

For now, the move amounts to a recovery from the sell-off, underpinned by dip-buying and broker and buyback tailwinds. The operational test lies ahead: lower US loss rates and delivery against the annual guidance are the yardsticks by which the confidence behind those buy calls will be measured.

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