Zip Co's (ASX:ZIP) impressive US results over the last two years show a high level of control over risk settings and volume rates, which should allow the company to sustain strong growth given its large total addressable market, RBC Capital Markets said in a Wednesday note.

The company's investors have "endured a wild ride" in recent years because the business is often the victim of misplaced readthroughs, the equity research firm said.

It pointed to four catalysts behind Zip's sharp stock price fluctuations, including agentic commerce, loss rates, macro issues, and regulatory risk.

The most recent sell-off in Zip was sparked by the release of Meta's personal AI agent Muse, and the risk that it could lead to volume being directed away from Zip. But as most of the company's customers have no other form of credit, this "virtually makes them a non-starter when it comes to switching payment channels," RBC said.

It added that agentic commerce could actually offer a meaningful structural tailwind as it opens new checkout surfaces and cuts friction in the consumer purchase journey, potentially boosting buy now, pay later adoption in the US.

Commenting on the evolving regulatory environment for buy now, pay later in the US, RBC said the risk is manageable if the final rules are softened. But in their currently proposed form, they could meaningfully pressure Zip's US unit economics.

RBC reaffirmed an outperform rating on Zip Co with a price target of AU$5.

Zip Co's shares added 1% in recent Wednesday trade.