Digital Payments And BNPL Trends Will Expand Market Reach

Key Takeaways

• Explosive user growth, deeper engagement, and premium product migration point to outsized revenue and margin expansion, surpassing analyst expectations.
  
• Strategic in-store expansion and agile underwriting give Sezzle a structural edge, driving share gains and resilience amid rapidly evolving digital payments trends.
  
• Rising regulatory scrutiny, competition, and product mix shifts threaten Sezzle's revenue growth, profitability, and stability due to higher costs, margin pressure, and geographic concentration risk.

Catalysts

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

• While analyst consensus expects double-digit revenue growth and 55% pre-tax net income gains, Sezzle's rapid adoption of its On-Demand and subscription products-with revenue up 76% and adjusted net income nearly doubling year over year-suggests these figures could be materially exceeded as strong lifetime value cohorts accelerate top-line and earnings growth further.
  
• Analysts broadly agree Sezzle's enhanced engagement and expanding user base will modestly lift retention and margins, but with revenue-generating user engagement surging 138% and active users up 52%, the company may be on the cusp of unlocking significantly higher margins and recurring revenues through deeper app engagement and premium product migration.
  
• Sezzle's proactive expansion into in-store payments and underpenetrated retail verticals, alongside 37% of Anywhere product usage now occurring offline, positions the company to capture a much larger share of the rapidly shifting spend from cash to digital, driving step changes in transaction volumes and revenue.
  
• With digital payments adoption and e-commerce growth continuing at double-digit rates-especially among younger, credit-hungry demographics-Sezzle's proven agility and category-leading NPS score could catalyze outsized user and merchant acquisition, resulting in compounding transaction growth and superior earnings persistence.
  
• The company's ongoing optimization of proprietary underwriting allows for real-time limit adjustments and disciplined expense management, giving Sezzle a structural advantage to both protect and expand net margins during macro volatility-far surpassing peers constrained by legacy credit products.

Sezzle Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Sezzle compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Sezzle's revenue will grow by 36.4% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 28.1% today to 26.2% in 3 years time.
• The bullish analysts expect earnings to reach $247.4 million (and earnings per share of $6.41) by about August 2028, up from $104.6 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 26.4x on those 2028 earnings, down from 28.9x today. This future PE is greater than the current PE for the US Diversified Financial industry at 16.0x.
• 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 7.55%, as per the Simply Wall St company report.

Sezzle Future Earnings Per Share Growth

Risks

• Growing regulatory scrutiny and tightening of consumer credit rules, especially as Sezzle expands its risk tolerance to include more first-time and potentially subprime users, could increase compliance costs and restrict product offerings, directly constraining future revenue growth and impacting net margins.
  
• Intensifying competition from both established BNPL providers and large tech or financial incumbents threatens Sezzle's ability to retain its take rate and market share, resulting in compressed gross margins and potential pressure on earnings as customer acquisition costs may rise while pricing comes under pressure.
  
• The rapid shift and innovation in digital payments, with ecosystem consolidation among major players, may undermine Sezzle's competitive differentiation, leading to lower growth in active users and merchants, and potentially stalling or reversing revenue and transaction volume momentum.
  
• Increased reliance on On-Demand products, which Sezzle acknowledges have the lowest margins and lifetime values compared to its Premium and Anywhere subscriptions, raises the risk that their user base shift could structurally dilute average profitability, leading to weaker net income and reduced overall earnings quality in the long term.
  
• Sezzle's geographically concentrated exposure in North America and lack of meaningful international diversification leaves it vulnerable to regional macroeconomic downturns or regulatory shocks, risking both revenue stability and earnings consistency, particularly if consumer credit quality erodes or local regulations tighten.

Valuation

• The assumed bullish price target for Sezzle is $150.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Sezzle's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• 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 bullish analysts, you'd need to believe that by 2028, revenues will be $943.2 million, earnings will come to $247.4 million, and it would be trading on a PE ratio of 26.4x, assuming you use a discount rate of 7.5%.
• Given the current share price of $88.85, the bullish analyst price target of $150.0 is 40.8% 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.