Zip Co Ltd (ASX: ZIP) shares recently nudged 52-week highs of $3.50 on November 12, marking a superb gain for the year.

Shares have since retreated from that mark and now rest at $3.28 apiece at the time of writing, holding onto a 417% gain this year to date.

Despite the short-term pullback, Zip shares remain one of the top performers, and investors continue to monitor this stock closely.

So, is this a buying opportunity, or has the buy now, pay later (BNPL) star already peaked? Let's see what the experts think.

Why is Zip down this past week?

The recent decline in Zip shares coincides with broader market volatility and investor caution around high-growth tech stocks.

Some are also cautious about the buy now, pay later (BNPL) sector's sensitivity to rising regulatory scrutiny, following new rules that make the Reserve Bank of Australia (RBA) the sector's overseer.

But Zip has continued to post impressive financial results, and its fundamentals seem fairly solid.

The company reported a 19% increase in first-quarter revenue to $240 million and an eye-popping 233% jump in pre-tax earnings compared to the previous year.

Notably, total transaction value (TTV) rose 22.8% to $2.8 billion in Q1 FY25. TTV is a key measure of the company's performance, so growth in it is essential for Zip's growth.

After bottom-feeding at 30 cents per share in October last year, the company has staged an extraordinary turnaround.

A sharp focus on profitability, cost management, and product innovation has reinvigorated investor confidence.

Zip's success in the US market has also been a major catalyst. In Q1 FY25, TTV in the Americas surged 43%, accounting for the majority of the company's growth.

Aside from this, CEO Cynthia Scott has pointed to increasing consumer resilience and a favourable macroeconomic environment as tailwinds for the business.

This combined with partnerships in high-spend categories like airfares and jewellery.

Should you buy the dip on Zip shares?

The key question for investors is whether Zip shares have more room to run or if the recent rally has already priced in future gains.

To this point, experts remain divided.

Some, such as WAM Capital Limited (ASX: WAM), point to Zip's strong earnings momentum and its ability to capitalise on lower interest rates as reasons for optimism.

Others caution that the BNPL industry remains vulnerable to regulatory changes and economic uncertainty.

Unified Capital Partners believes that an easing of interest rates could be positive for consumers and the BNPL sector. According to The Australian Financial Review:

The broader macro trends have been positive, and we suspect seasonality, alongside broader environment acceleration, into the second quarter.

Meanwhile, consensus rates the stock a hold, according to CommSec. There are no sell ratings.

On that basis, experts say this dip could be an opportunity for those with a high-risk tolerance to accumulate Zip shares at a more reasonable price.

But conservative investors might prefer to wait for clearer signs of sustained profitability.

The bottom line on Zip shares

Zip shares have had a record-breaking year, but the recent dip reminds us that the BNPL sector is not without risks.

Zip shares are down 6% in the past week.