Sezzle

Shares of Sezzle (SEZL 0.77%), the high-flying BNPL (buy now, pay later) stock, were pulling back in September as part of a broader retreat among fintech stocks.

Investors sensed a weakening in the credit market as downbeat employment data and a pair of bankruptcies in the auto sector sent Sezzle and a number of its peers lower last month, even as the broad market gained. Sezzle is a recent IPO, and investors have yet to see it go through a full credit cycle. Therefore, it’s not surprising for it to show some sensitivity to rising credit risk.

According to data from S&P Global Market Intelligence, Sezzle stock finished the month down 16%. As you can see from the chart below, the stock was volatile but steady through the first few weeks of the month before sinking toward the end, following the Federal Reserve’s rate cut.

SEZL data by YCharts

Sezzle pulls back again

Sezzle has been a standout performer in the BNPL sector, though the stock is now down more than 50% since its peak in July, as concerns about its ability to maintain its growth rate seem to have taken over.

In addition to worries about rising credit risk on the macro level, one Wall Street analyst weighed in on the stock last month.

TD Cowen initiated coverage of the stock with a hold rating and a price target of $82. Cowen noted the company’s rapid growth, but credited that to the strength of the BNPL sector, and said that the sector is trading in a narrow valuation range. Based on the price target, the analyst expected a pullback in the stock, and Sezzle stock fell 1.6% on Sept. 11, the day the report came out.

Additionally, Shopify asked a judge to dismiss a lawsuit filed against it by Sezzle which alleges that Shopify’s BNPL product is anticompetitive and violates antitrust laws.

That news seemed to contribute to the sell-off at the end of the month as the Fed rate cut and other macro-level news added to worries about rising credit risk.

Image source: Getty Images.

What’s next for Sezzle?

Sezzle continues to grow at breakneck speed, with the company forecasting 60%-65% revenue growth for 2025. However, growth in charge-offs outpaced revenue growth in the second quarter, rising from $8.2 million to $20.3 million. That could be a sign that its customers are having more challenges in paying Sezzle back, but it still seems too early to tell.

While its revenue growth and profitability are impressive, rising delinquency rates would spoil the bull case for the stock.

Sezzle (SEZL -1.34%) saw its monster surge hit a wall last month as the breakout BNPL (buy now, pay later) company posted strong results in its second-quarter earnings report, but its guidance wasn’t quite enough to keep up the stock’s momentum. Management still expects a substantial deceleration in the second half of the year.

There was little else in the way of company-specific news last month, and the stock traded flat after the earnings plunge, finishing the month down 39%, according to S&P Global Market Intelligence.

You can see the stock’s performance over the course of the month below.

SEZL data by YCharts

Is the Sezzle breakout over?

Sezzle continued to deliver blistering growth in the second quarter with revenue up 76.4% to $98.7 million, which topped estimates at $94.9 million. That was driven by strong on-demand growth, meaning consumers who use the BNPL product without a subscription, as well as its partnership with WebBank, which agreed to be its exclusive banking partner last year.

User growth was strong as well with monthly on-demand and subscribers (MODS) reaching 748,000, up from 658,000 in the first quarter, and it delivered impressive margin expansion as operating income jumped 116.1% to $36.1 million, and adjusted earnings per share was up 97% to $0.69, which beat the consensus at $0.58.

Sezzle’s growth seems to be driven by a combination of new products, its focus on subscribers, and broader adoption of BNPL, which has seen strong growth as consumer confidence has fallen over fears around tariffs and now a weakening job market.

Image source: Getty Images.

What’s next for Sezzle

Sezzle sees strong growth for the full year, but it may have been below investor expectations given the strong Q2 results. It also did not update its guidance from the first quarter, which was likely a disappointment to investors.

For the full year, the company sees revenue growth of 60% to 65%, though that implies a sharp slowdown after revenue essentially doubled in the first half of the year. It also called for adjusted earnings per share of $3.25, which is slightly below the consensus at $3.27.

Sezzle has delivered a remarkable performance over the past couple of years. The stock was trading at under $2 a share (split-adjusted) at the end of 2023.

While the company’s differentiated model has helped it build momentum, it’s understandable for the stock to cool off in response to slowing growth. Still, the valuation looks attractive now at a forward P/E under 30.