Unpacking the Bullish Thesis on Sezzle Inc. (SEZL)
As of May 15th, Sezzle Inc. (SEZL) was trading at $90.10, and its trailing P/E ratio stood at 30.35 according to Yahoo Finance. But what underpins this optimism surrounding SEZL? Let’s delve deeper into the bullish thesis that has captured investor attention.
Transforming the BNPL Landscape
Sezzle has transitioned from a speculative startup in the buy-now-pay-later (BNPL) market to a robust, founder-led fintech powerhouse. By providing interest-free installment plans primarily in the U.S. and Canada, Sezzle has carved out a unique niche. Monetizing through merchant transaction fees rather than traditional interest charges positions the company as a consumer-friendly alternative in a typically crowded market.
What truly sets Sezzle apart is its mission-driven approach to financial empowerment. The platform offers tools like budgeting, rescheduling, and gamified education to help consumers become more financially literate. This unique value proposition not only benefits users but also enhances customer loyalty.
Remarkable Financial Performance
In Q1 2025, Sezzle reported staggering results, with revenue growing by 123% and net margins reaching an impressive 34%. A 300% EPS beat prompted management to revise full-year guidance upward by 50%. These figures are not just numbers; they reflect a company on the rise, helmed by founder and CEO Charlie Youakim, who retains a significant 44% ownership stake. This ownership ensures a strong alignment of interests between management and shareholders—a critical factor for any serious investor.
Sezzle has exhibited tight capital discipline, illustrated by a successful $25 million buyback, and has managed to limit dilution since 2020. Projections indicate that EPS may rebound from –$1.20 in FY22 to an impressive $3.25 in FY25. With compelling valuations of just 27x forward EPS and 14x EV/EBITDA, Sezzle remains attractive compared to its peers like Affirm and Klarna.
Robust Market Potential
Even with a market capitalization of $2.7 billion, Sezzle is a small player in a BNPL market projected to balloon to $290 billion GMV by 2030. Currently, Sezzle’s GMV is just $2.6 billion, providing ample room for growth. Its proprietary behavioral underwriting and innovative products, such as Pay-in-5 and virtual cards, showcase a commitment to adapting and thriving in an evolving market landscape.
Sezzle’s insider ownership at 50% and robust institutional backing present an asymmetric investment opportunity, with potential returns of 3-5x over the next 12 months. The base case target of $188 and an optimistic bull case of $291 underline the upside potential for investors willing to take on some risk.
Hedge Fund Interest and Market Comparisons
Interestingly, Sezzle is not among the 30 most popular stocks among hedge funds. By the end of the fourth quarter, 19 hedge fund portfolios included SEZL, up from 12 in the previous quarter. While this indicates growing interest, our analysis suggests that certain AI stocks could yield greater returns in a shorter timeframe.
For those seeking exceptional opportunities, we recommend exploring our report on the most undervalued AI stocks. One notable contender trades at less than 5 times its earnings, presenting a compelling comparison for those weighing their investment options.
In summary, Sezzle Inc. holds significant promise as a fintech disruptor in the BNPL space. With impressive growth metrics, committed leadership, and a focus on consumer empowerment, it offers an attractive investment proposition. However, investors should consider a broader landscape, including emerging AI opportunities that might yield even more substantial returns.