Zip Co (ASX:ZIP) 25% drop in share price Thursday following its latest quarterly results was "overdone", according to a Friday report from The Australian, citing investment and financial services firm Citi.
The digital financial services provider said Thursday its revenue rose nearly 21% year-on-year to AU$269.4 million in the fiscal second quarter.
However, the revenue margin fell to 7.9% from 8.2% a year ago.
While the company's US business continues to deliver strong growth, Citi Analyst Siraj Ahmed believes that expectations for it to slow to 35% year-on-year in the second half of the fiscal year is "conservative".
Ahmed points out that this projection assumes a 5% decrease in customer spending when spending increased by 6% on a half-on-half basis in the last two years.
He notes that ZIP's payment industry peers are trading at around 26 times fiscal 2026 earnings before interests, taxes, depreciation, and amortizations. The company is trading at a discount of 20 times.
Citi upgraded Zip Co to Buy from Neutral but cut its price target to AU$3.
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