Digital Payments Expansion Will Unlock New Market Opportunities

Key Takeaways

• Strong momentum from younger consumers, efficient customer acquisition, and expanding product offerings position Sezzle for sustained revenue growth and improved margins.
  
• Disciplined risk management, cost optimization, and robust merchant acceptance support stable long-term earnings and a competitive edge in the digital payments space.
  
• Heavy marketing spend, low-margin product reliance, rising credit losses, geographic concentration, and unresolved litigation collectively threaten Sezzle's future profitability and revenue stability.

Catalysts

Operates as a technology-enabled payments company primarily in the United States and Canada.

• Sezzle's rapid growth in both active consumers (2.9 million, up nearly double digits YoY) and engagement (monthly active users up 52% and engagement from revenue-generating users up 138% YoY) demonstrates strong momentum from younger consumers' sustained preference for flexible, low-interest alternatives to credit cards, signaling continued top-line (revenue) growth.
  
• Ongoing investment in efficient, data-driven customer acquisition (marketing spend increase to $8.8 million with a targeted six-month payback and rapid ramp in high-LTV "mod" users) positions Sezzle to capitalize on the global shift toward digital payments, supporting expanding total addressable market (revenue growth) and potential for operating leverage (margin improvement) as investments mature.
  
• Strategic expansion of product offerings (On-Demand, Premium, and Anywhere) and cross-selling efforts targeting migration from low-margin On-Demand to higher-margin subscription products lays groundwork for increased consumer lifetime value and sustained improvement to net margins and earnings.
  
• Proven optimization of payment processing costs (e.g., increased ACH use) and continued development of proprietary underwriting/risk management technology (ability to strictly manage limits, especially in volatile markets) enables Sezzle to maintain or improve net margins through disciplined credit loss management and efficient operations, even as it scales.
  
• Positive industry dynamics-namely increasing acceptance of BNPL among merchants (412,000+ unique merchants) and growing in-store transaction capability-support a robust competitive position; this, combined with stable regulatory outlook and Sezzle's responsible lending ethos, underpins recurring transaction growth and long-term earnings stability.

Sezzle Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Sezzle's revenue will grow by 33.5% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 28.1% today to 26.2% in 3 years time.
• Analysts expect earnings to reach $232.2 million (and earnings per share of $5.65) by about September 2028, up from $104.6 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 24.7x on those 2028 earnings, down from 30.2x today. This future PE is greater than the current PE for the US Diversified Financial industry at 16.5x.
• Analysts expect the number of shares outstanding to grow by 1.13% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.5%, as per the Simply Wall St company report.

Sezzle Future Earnings Per Share Growth

Risks

• Heavy investment in marketing ($8.8 million in Q2 vs. $1 million prior year) could pressure net margins and earnings if customer acquisition costs do not deliver expected 6-month payback period or if competitive intensity forces further increases in spend without proportional revenue growth.
  
• The majority of user and revenue growth is currently driven by the lower-margin On-Demand product, which has lower lifetime value and profitability compared to subscription products (Premium and Anywhere), raising concerns about long-term gross margins and earnings if On-Demand users do not migrate to higher-margin offerings.
  
• Provision for credit losses increased to 2.2% of GMV (from prior periods), indicating higher risk exposure as the company expands its risk tolerance and lends to more first-time users-potentially leading to persistently elevated credit losses impacting net margins and future earnings, especially if macroeconomic conditions deteriorate.
  
• Sezzle's continued focus on the U.S. and Canada, with limited updates on international expansion, could expose the company to geographic concentration risk; adverse regulatory changes or economic downturns in these core markets may significantly affect revenue stability and earnings volatility.
  
• Ongoing and potentially protracted litigation with Shopify (potentially unresolved for up to 3–5 years) introduces uncertainty and possible material financial risk to both revenue (via partner disruptions) and future earnings (through legal expenses or negative outcomes).

Valuation

• The analysts have a consensus price target of $131.667 for Sezzle based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $150.0, and the most bearish reporting a price target of just $111.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $885.4 million, earnings will come to $232.2 million, and it would be trading on a PE ratio of 24.7x, assuming you use a discount rate of 7.5%.
• Given the current share price of $92.75, the analyst price target of $131.67 is 29.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.