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Sezzle is a standout player in the rapidly growing buy now, pay later (BNPL) sector.
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Despite a decline in the fintech’s stock price, its valuation remains more favorable than its competitors.
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One potential concern could be the broader BNPL market’s challenges.
Sezzle (NASDAQ: SEZL) began the year on a high note, with its stock surging from $45 in January to over $180 at the beginning of July—an impressive 300% increase. However, recent challenges have led to a significant decline of more than 40% over the last few months.
Following the company’s second-quarter earnings report on August 7, many investors exited their positions, resulting in a 34% drop in the fintech company’s shares the following day. By market close on October 8, the stock had fallen 41% from its pre-report valuation.
While a correction was indeed overdue, the extent of the decline appears excessive. Sezzle is a frontrunner in the buy now, pay later (BNPL) landscape and stands out as one of the few profitable companies in this sector. Despite existing concerns, Sezzle’s robust growth rates and attractive trailing price-to-earnings ratio present a positive outlook.
Though Sezzle’s share price plummeted after the Q2 earnings release, the results were relatively strong. While investors anticipated even better outcomes, the report underscored that Sezzle is successfully capturing market share from competing BNPL firms.
Sezzle showcased a remarkable 76% increase in year-over-year revenue and forecasts continued growth of 60% to 65% year-over-year through 2025. These projections exceed those of Affirm, which reported a 33% year-over-year revenue growth in its latest quarter.
Although Affirm is expanding its customer base, demonstrating a 24% year-over-year growth in Q4 FY25, Sezzle takes the lead with a sequential customer growth rate of 13.7%. Furthermore, Sezzle’s profit margins significantly surpass those of Affirm and other competitors like PayPal, Bread Financial, and Block.
Sezzle’s projected revenue growth hints at its ability to continue gaining market share from its fintech rivals. With the company’s proactive adjustments to its fiscal 2024 guidance made three times already, further positive developments can be anticipated.
Sezzle doesn’t only excel in growth metrics; it also boasts a more favorable valuation compared to its competitors, presenting a unique opportunity within the fintech arena. Affirm’s growth rates are somewhat comparable, yet it trades at a staggering trailing P/E ratio of 598 versus Sezzle’s more modest 29. This represents a dramatic disparity of over 20 times between these two BNPL entities.
