Why Zip Co Fell Even As Profit Rose

Zip Co kept serving up upbeat headlines on AI partnerships, U.S. expansion and a richer profit profile, yet long term holders saw something very different on their statements. For Zip Co shareholders, the loss over the past year was 40.1%, including dividends. If you had bought in when analysts were arguing over A$4 handle targets and fair value gaps, how could solid-looking results still pair with such a heavy hit to your capital?

This theme extends beyond Zip Co. See which of 41 profitable AI stocks that aren't just burning cash may still merit a closer look.

The Two Zip Co Stories Investors Were Arguing About

The shares cost A$3.61 at the start of the period, and anyone looking at Zip Co had to decide which story felt more plausible.

The bullish Narrative pointed to a Fair Value of A$4.58, a price that would only make sense if assumptions such as 17.4% annual revenue growth and a 12.5% profit margin played out.

The bearish Narrative suggested a Fair Value of A$2.1, implying 42% downside risk if tighter regulation and funding pressures in markets like the US squeezed earnings power.

What The Results And New Deals Tested At Zip Co

Zip Co signed fresh AI and U.S. partnerships, including work with Google Cloud, Stripe and major retailers like Best Buy and Rally House. That lineup backed the optimistic story about product breadth and American reach. The numbers told a more mixed tale. Revenue and net income were higher in H2 2026 than H2 2025, yet net margin slipped from 10.1% to 9.4%. Overall, the evidence cut both ways.

The big assumption was that growth would come with fatter margins. When you assess another fintech, check whether each new deal shows up not just in sales and profit, but also in a clear, stable or improving net margin line.

What Zip Co's Drop Asks You To Believe Today

Zip Co now trades at A$2.02, and the selected Narrative sees Fair Value as sitting above that level based on its current set of assumptions about the business. That view leans heavily on AI driven underwriting, fraud control and the reach of its U.S. and platform partnerships.

The share price is down about 40% over the past year, so any buyer today would need to judge that Zip Co can keep fraud and bad debts in check while scaling new U.S. products and AI features without letting margins or cash earnings slip.

"The main factor that has to go right is that Zip Co continues to balance new product rollout and active customer growth with tight credit control, especially in the U.S. Pay in Z portfolio."

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

How Could You Get There Earlier?

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 - 33% below our estimate - finances commercial apartment developments as traditional lenders scale back on commitments.
• Company 2 - 32% below our estimate - expands an integrated dealerships platform spanning used inventory, auction services and flexible rentals.
• Company 3 - 24% below our estimate - wins longer term infrastructure service agreements that convert episodic projects into recurring revenue.

Those are three of them. See all 4 potentially undervalued companies →

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