Zip Co (ASX:ZIP) Could Be 54% Undervalued On Best Buy Store Expansion

Zip Co (ASX:ZIP) is back in focus after announcing a nationwide expansion of its partnership with Best Buy, extending Zip's flexible payment options into physical stores across the United States.

Recent trading tells a mixed story for Zip Co. The 1-day share price return of 6.59% to A$1.86 came after the Best Buy expansion news, yet the 30-day share price return is down 7.92% and the year-to-date share price return is down 44.48%. Even with that pressure, the 3-year total shareholder return is very large at about 7x, which hints that investors are reassessing how much risk they are willing to take on future growth after a powerful earlier rebound.

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The Best Buy deal spotlights real shifts in how Zip Co earns and processes transactions, yet the share price swing feels driven just as much by mood. So how does that balance look on valuation today?

Most Popular Narrative: 54% Undervalued

Against the last close of A$1.86, the most followed narrative for Zip Co points to a fair value near A$4.03, so the Best Buy news is landing on a stock that this framework already views as heavily discounted.

The company's ongoing international expansion, particularly in the underpenetrated U.S. market where BNPL is less than 6% of e-commerce spend, provides significant runway for organic revenue growth and supports geographic diversification, de-risking the business model and enabling long-term scale.

See why 90 investors see Zip Co as 54% undervalued .

Result: Fair Value of A$4.03 (UNDERVALUED)

Still, the most fragile parts of the Zip Co story relate to stricter BNPL regulation and tougher credit outcomes if newer products or customer segments misfire.

Find out about the key risks to this Zip Co narrative .

Another View: Zip Co On Earnings Multiples

DCF models and analyst fair values suggest Zip Co looks cheap, but the current P/E of 19.9x tells a different story. That figure sits well above both the peer average of 11.1x and the global Consumer Finance mark of 10.2x, even though the fair ratio sits higher at 29.5x.

This gap means the stock already prices in stronger profitability than many rivals, yet still trades below where the fair ratio suggests the market could drift over time. For investors weighing risk, the question is whether the quality of Zip Co's earnings justifies paying up on this metric, or whether there is less margin for error than the DCF signals.