Jefferies upgrades Zip stock rating to Buy as US customer growth exceeds expectations

Jefferies has upgraded Australian buy-now-pay-later provider Zip Co Ltd (ASX:ZIP) from Underperform to Buy, more than doubling its price target to AUD4.40 from AUD2.10. This upgrade is driven by stronger-than-expected fourth-quarter US customer growth and robust fiscal year 2026 US Total Transaction Value guidance. The firm noted management's sustained momentum into FY26, supported by its High-Frequency Data, and dismissed earlier proprietary survey concerns, signaling significantly improved business prospects for Zip, particularly in the crucial US market.

Analysis

Jefferies has executed a significant upgrade on Zip Co Ltd, elevating its rating from Underperform to Buy and more than doubling its price target to AUD4.40 from AUD2.10. This substantial revision is anchored in tangible performance indicators, specifically stronger-than-expected fourth-quarter US customer growth and a robust fiscal year 2026 guidance for US Total Transaction Value (TTV). The upgrade's conviction is bolstered by management's confirmation that momentum from fiscal year 2025 has carried into fiscal year 2026, a trend that Jefferies' proprietary High-Frequency Data supports. Critically, the research firm has explicitly dismissed its own cautionary survey data from May, indicating a high degree of confidence in the recent, more positive operational data. The analysis underscores that these improvements are occurring within the crucial US market, signaling a material enhancement of the buy-now-pay-later provider's core business prospects.

Key Decisions for Investors

• Given the strong bullish signal from a major research firm, including a doubled price target, investors should consider this a potential inflection point for Zip Co and reassess their positions accordingly.
• The thesis is heavily contingent on US market performance; therefore, investors must closely monitor upcoming TTV and customer acquisition data from the US to validate the continuation of this positive trend.
• While Jefferies' dismissal of its own prior cautious survey shows high conviction, it also highlights recent volatility in outlook, so investors should weigh the risk that this new positive trajectory may not be sustained.