Zip's (ASX:ZIP) fiscal third-quarter results confirmed that the company has "very good control" over unit economics, and softer consumer sentiment could translate into more usage of its services given its non-discretionary customer base, Jefferies said in an April 17 note.
The equity research firm said Zip's US bad debts likely peaked at 1.9% of total transaction value in the fiscal third quarter, while its revenue margin recovered to 8.4%, which was "a solid result" given the mix shift toward the US.
The company also saw higher engagement in the US, as average spend per customer increased more than 32% year over year and average transactions per customer gained roughly 22%, indicating that repeat usage is gaining traction, according to the note.
"Groceries and utilities are significant contributors to US growth, and these nondiscretionary spend categories should be less susceptible to macro headwinds," Jefferies said.
The equity research firm upgraded its fiscal 2026 cash earnings before taxes, depreciation, and amortization forecast for Zip by 5%, but cut it by 11% for fiscal 2027 due to currency headwinds and a lower revenue margin in Australia and New Zealand.
Jefferies maintained a buy rating on the company and lowered its price target to AU$3.80 from AU$4.20.
Zip's shares surged almost 9% in recent Monday trade.