Zip Co Ltd (ASX: ZIP), a prominent player in the buy now, pay later (BNPL) sector, has seen a remarkable surge in its share price over the past two months. While the broader S&P/ASX 200 Index (ASX: XJO) has remained relatively steady, the Zip share price has taken flight, offering savvy investors an opportunity to capitalise on the momentum in the ASX tech and financial sector.

As of today, shares are trading at $2.22, a slight dip from Thursday’s close of $2.24. However, this minor movement pales in comparison to the explosive 87% rise Zip shares have delivered since hitting their 52-week low of $1.19 back in April.

An $8,000 investment in Zip Co shares in early April would now be worth nearly $15,000 — a powerful reminder of the upside potential small-cap stocks can deliver in favourable conditions.

What’s Driving the Zip Co Share Price Surge?

Portfolio manager Michael Carmody from Centennial Asset Management remains optimistic about the trajectory of this ASX-listed BNPL stock. Speaking to The Australian Financial Review, Carmody highlighted a combination of macroeconomic tailwinds and company-specific catalysts fueling the Zip stock price performance.

Carmody pointed to expected interest rate cuts by the Reserve Bank of Australia (RBA) as a key factor. With the current official cash rate at 3.85%, markets are anticipating further rate reductions, which could support household spending and favour consumer-facing tech companies like Zip.

“We expect several more rate cuts over the next 12 months, which bodes well for domestic demand and companies like Zip that are directly linked to discretionary spending,” said Carmody.

BNPL companies typically thrive in low-interest environments due to reduced borrowing costs and an uptick in consumer transactions — a trend that could offer Zip sustained momentum into 2026.

Zip Co Positioned for Revenue and Earnings Growth

Looking ahead, Carmody sees significant upside in Zip’s fundamentals. The company has continued to surprise the market with better-than-expected earnings, reporting $46 million in EBTDA in its Q3 update — a 219% increase year-on-year.

The bullish sentiment is further reinforced by the company’s expanding footprint in the US BNPL market, which remains underpenetrated. As Zip scales in the US and launches new offerings, analysts expect transaction volumes and top-line revenue to grow meaningfully.

Other Catalysts Boosting the Zip Share Price

In April, Zip announced a $50 million on-market share buyback, a move that has already seen $6.4 million worth of shares repurchased by early May. Share buybacks generally reduce the float and can support or boost share prices by increasing earnings per share (EPS).

Additionally, Zip’s strong balance sheet and strategic product rollouts are expected to contribute to earnings growth and improve investor sentiment.

“Post the most recent quarter, Zip upgraded its guidance again. There’s a real possibility of further upside risk to earnings,” Carmody noted.

Should You Add Zip Shares to Your Portfolio?

While past performance is no guarantee of future returns, Zip Co’s sharp share price rebound, improving financials, and positive macroeconomic outlook paint an optimistic picture for long-term investors. For those seeking exposure to ASX growth stocks, emerging fintech companies, or consumer discretionary shares, Zip is a stock to keep on your radar heading into 2026.

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