Klarna Vs. Sezzle: Buy Now, Pay Later At A Materially Low Multiple

Sezzle (SEZL) is up nearly 90% YTD and is expected to report adjusted FY2026 EPS of $5.25/share, trading at a 22.7x P/E. SEZL also delivered a 76.4% YoY increase in active subscribers. By contrast, Klarna (KLAR) is down 50% on a price-return basis amid a profitability gap—though subscribers rose 8x YoY to 2 million and Klarna Card reached 6.5 million active users.

Analysis

The market is rewarding proof-of-profitability over user growth, and that usually means a faster multiple reset for the name still buying scale. In BNPL, the operating leverage is real, but so is the credit-loss lag: once funding costs and charge-offs stabilize, earnings power can inflect sharply, which is why the profitable model deserves a premium, not just a higher subscriber count. The second-order effect is that merchants and lending partners will increasingly steer volume toward the platform that can price risk more predictably, reinforcing share gains for the cleaner balance sheet and pressuring the growth-first model to subsidize acquisition longer.

The near-term catalyst path is mostly about revisions. SEZL’s multiple can stay elevated if it keeps converting subscriber growth into earnings without visible loss deterioration, but at ~23x forward earnings the stock is vulnerable to any hint that growth is peaking before margin maturity. KLAR’s key issue is not top-line adoption; it is whether those cohorts become monetizable enough to close the gap on contribution margin and cash flow. If that inflection does not show up in the next 1-2 quarters, the market is likely to keep treating KLAR as a financing story rather than a durable compounder.

Contrarian view: the gap may be over-discounting KLAR’s optionality. A card-based ecosystem with a large active base can re-rate quickly if attach rates, interchange, or credit performance improve, so the short thesis needs proof that growth is still being bought uneconomically. What would falsify the trade is either a SEZL guide-down or a credible KLAR path to positive operating leverage; absent that, the relative trade remains in favor of the profitable name.

Key Decisions for Investors

• Long SEZL / short KLAR as a 1-3 month relative-value pair into the next earnings cycle; thesis is multiple convergence toward profitability, with risk limited by keeping the hedge dollar-neutral.
• On any pullback in SEZL that is not tied to a guide-down, add to longs rather than chase strength; the right entry is a volatility event, not momentum continuation.
• Keep KLAR underweight versus profitable fintech peers until there is visible evidence of contribution-margin expansion and loss normalization; the thesis breaks if KLAR shows a credible cash-flow inflection over the next 1-2 quarters.
• If borrow/liquidity is favorable, use a defined-risk short in KLAR rather than outright naked exposure; the upside squeeze risk is a sentiment-driven re-rating on any monetization surprise.
• Set an alert on SEZL guidance and credit metrics: a revision lower in EPS or a deterioration in losses should trigger profit-taking, while a clean print supports holding for a longer 6-12 month rerating.