Zip Co Shares Slid Even Though Profit Rose

If you backed Zip Co on the strength of its partnerships, AI push and buyback story, the recent scorecard has likely felt rough. Investors who held Zip Co from the start of the year are down 35.5%, including dividends. If that decision sat on those December 2025 assumptions of 17.4% revenue growth, margin expansion to 12.5% and a future P/E of 33.5x, which parts of that thesis did not fully account for what actually unfolded inside the business?

The useful thing about a Narrative is that the reasoning is checkable: the assumptions sit beside the argument, and together they imply an estimated Fair Value you can disagree with.

If the move has made Zip Co harder to judge, start where the gap is still open and scan 4 high quality undervalued stocks.

The Two Zip Co Stories Investors Had To Weigh

The shares cost A$3.29 at the start of the period, and Zip Co sat between two very different stories about what might come next.

On the optimistic side, analysts framed a Fair Value of A$4.58, assuming revenue growth of 17.4% a year and profit margins rising to 12.5%, helped by partnerships such as Google Pay and Stripe.

The cautious view pinned Fair Value at A$2.10, emphasizing regulatory pressure in key markets and funding dependence as risks to margins and growth.

What The Zip Co Results Put To The Test

The clearest new datapoint was Zip Co’s H2 2026 report. Revenue reached A$677.9m and net income excluding extra items was A$64.0m, compared with A$562.4m and A$56.9m in H2 2025, while net margin slipped from 10.1% to 9.4%. That combination of higher sales and profit but softer profitability supported the optimistic growth story yet challenged the margin uplift assumption.

The lesson is simple. When a thesis leans on both expansion and richer profitability, you need to track not just revenue and earnings, but the reported margin line that links them.

What Zip Co’s Drop Leaves On The Table

Zip Co now trades at A$2.16 from the start of the year, after a 35.5% loss including price moves. The selected Narrative’s Fair Value sits above the current price, based on a view that partnerships, AI and buybacks can still reshape earnings power.

A buyer today would need to believe the drop reflects short term worry while long term transaction volume, credit outcomes and operating leverage track the Narrative’s script.

"Zip Co is poised to benefit from the accelerating shift toward digital payments and increasing e-commerce penetration, as evidenced by strong transaction volumes (up 30%) and targeted partnerships with platforms like Google and Stripe, which are likely to drive higher transaction values and revenue growth."

Not everyone reads the same price the same way. → See the higher figure this Narrative lands on, and how it gets there

Go Straight To The Source

Passing on this one could have spared you a loss. Where might you find the opposite surprise? Start looking for companies whose prices leave room for a better outcome than investors expect. These three trade below our estimated value.

• Company 1 - 32% below our estimate - builds and maintains integrated AV, electrical and communications systems for complex commercial environments.
• Company 2 - 28% below our estimate - supplies replacement truck and bus parts while solving sourcing and compatibility problems for fleet operators.
• Company 3 - 35% below our estimate - runs multi-brand electronics and appliance stores that pair product breadth with add on services.

That is three of the list. See all 12 companies with the balance sheet to back it up →

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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