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On Wednesday, Goldman Sachs initiated coverage on Zip Co Ltd (ZIP:AU) (OTC:ZIZTF) with a Buy rating and a price target of AUD 2.50, suggesting a 37% upside from the current valuation. The new coverage comes as the company has undergone significant changes in its business strategy, focusing on sustainable earnings rather than just top-line growth.
Goldman Sachs highlighted the company’s successful transition, emphasizing the positive effects of a simplified and de-risked capital structure. This shift is seen as a key factor in supporting Zip Co’s long-term profitability. Analysts at Goldman Sachs acknowledged the economic and consumer credit risks present, especially in the United States, which have affected investor sentiment towards Buy Now, Pay Later (BNPL) companies. However, they remain optimistic about the stability of the US economy, citing low unemployment rates and manageable credit risk associated with BNPL products due to their short-term nature.
The firm’s analysts also pointed to the potential for Zip Co to capitalize on broader structural trends in the market. They believe the company has multiple opportunities to expand its operations in the United States and Australia and New Zealand (ANZ) regions. The positive outlook reflects confidence in Zip Co’s ability to grow and adapt within an evolving financial landscape.
Goldman Sachs’ endorsement of Zip Co’s stock with a Buy rating and an elevated price target reflects their belief in the company’s strategic direction and potential for growth. Their analysis suggests that despite the challenges faced by the BNPL sector, Zip Co is well-positioned to navigate through and emerge stronger.
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