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Investing.com - Jefferies downgraded Zip Co Ltd (ASX:Z1P) (OTC:ZIZTF) from Hold to Underperform on Tuesday, while raising its price target to AUD2.10 from AUD1.80.
The downgrade comes despite Zip’s mid-June trading update that guided for fiscal year 2025 cash EBTDA of at least A$160 million, up from previous guidance of at least A$153 million. Jefferies has revised its FY25 cash EBTDA estimate to A$163 million to reflect this updated guidance.
Jefferies identified potential risks emerging in the first half of 2026, with its estimates for US customer growth and cash EBTDA falling 2% and 17% below consensus respectively. The firm’s proprietary survey of over 1,000 BNPL users indicated Zip has shown the weakest brand momentum among 10 BNPL brands surveyed.
The investment bank also noted that Zip is likely to provide FY26 cash EBTDA guidance during its 1H26 results, which could disappoint as Jefferies’ forecasts are 9% below consensus for that period.
Zip shares have doubled in value over the past three months following the approximately 9% upgrade to FY25 EBTDA guidance, and according to Jefferies, the stock is now trading at a premium to both Australian and US buy-now-pay-later peers on EV/sales and EV/EBTDA multiples.
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