Since last Friday, shares of fintech company Sezzle (NASDAQ: SEZL) had blasted nearly 54% higher, as of 12:40 p.m. ET Friday. The company reported convincing first-quarter earnings results earlier in the week.
Big beat and raise
The buy-now-pay-later (BNPL) company reported first-quarter profits of over $36 million on revenue of nearly $105 million. Net income rose roughly fourfold on a year-over-year basis, while revenue more than doubled. The results soundly beat analyst estimates, according to Zacks consensus estimates.
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Furthermore, management raised profit expectations for the full year of 2025 by 50% and now expects $120 million in net income. Revenue is expected to grow 60% to 65% during the year, up from prior guidance of 25% to 30%.
“Our investments in innovation and consumer experience drove new highs in engagement and performance in the first quarter,” Sezzle’s chairman and CEO Charlie Youakim said in an earnings statement. “Stronger consumer activity and better-than-expected repayment trends propelled quarterly earnings above our expectations.”
Analysts at B. Riley Securities said in a research note that subscriber growth helped boost merchant sales after the holiday season, a time they would have normally expected to see slowing sales. They also noted that the increase in guidance was one of the largest they’ve seen in a while.
BNPL can be a volatile business
Sezzle undoubtedly reported a blowout quarter, and the company deserves the huge share price appreciation. However, with this now factored in, Sezzle trades at about 26 times forward earnings, and the stock can be volatile. BNPL companies depend on consumer spending and therefore could struggle if the economy experiences a recession, which is certainly in the cards this year. For this reason, I wouldn’t take more than a smaller, more speculative position right now.
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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Sezzle. The Motley Fool has a disclosure policy.
