On Wednesday, B. Riley initiated coverage on Sezzle Inc (NASDAQ:SEZL), a buy-now-pay-later (BNPL) service provider, with a Buy rating and a price target of $113.00. The firm highlighted Sezzle's transition into profitability and its promising growth trajectory within the rapidly expanding BNPL sector.
Sezzle has been recognized for its high growth and profitability, offering 0% APR point-of-sale financing that benefits both retailers and customers. The service is available for online and in-store purchases, contributing to the company's robust incremental sales. B. Riley underscored Sezzle's potential for high growth at a low marginal cost, which is expected to lead to significant margin expansion.
The company's financial performance has been strong, with Sezzle achieving net income profitability for the full year of 2023 and maintaining this profitability into the first quarter of 2024. This financial success, combined with a solid balance sheet, has increased the company's appeal to investors.
B. Riley's price target is based on a 16 times multiple on the firm's 2025 earnings per share (EPS) estimate. The firm anticipates Sezzle to continue its expansion by adding more retail partners, growing its consumer subscription services, and potentially partnering with a fintech bank to offer additional banking services.
The BNPL industry is expected to grow at a compound annual growth rate (CAGR) of 20% over the next decade. B. Riley believes that Sezzle is well-positioned to capitalize on this growth and that there is considerable upside potential for the company.
InvestingPro Insights
Sezzle Inc's (NASDAQ:SEZL) journey towards increased profitability and market presence has been reflected in its recent financial metrics. According to InvestingPro data, Sezzle's market capitalization stands at $462.01 million, with a notable P/E ratio of 29.43, which adjusts down to 12.72 when looking at the last twelve months as of Q1 2024. This adjustment highlights the company's growth in earnings relative to its share price. Additionally, Sezzle's revenue growth has been impressive, with a 29.45% increase over the last twelve months leading up to Q1 2024, and an even higher quarterly revenue growth rate of 35.49% for Q1 2024.
InvestingPro Tips suggest that Sezzle is trading at a low P/E ratio relative to near-term earnings growth and that net income is expected to grow this year. These insights are particularly relevant as they align with B. Riley's optimistic outlook for Sezzle's future profitability and growth within the BNPL sector. Moreover, the company's strong gross profit margin of 48.4% further validates the firm's assessment of Sezzle's promising financial trajectory.
For investors looking to delve deeper into Sezzle's performance and potential, additional InvestingPro Tips are available at https://www.investing.com/pro/SEZL. With these tips, investors can gain a comprehensive understanding of the factors driving Sezzle's market position and stock volatility. To enhance your investment research, use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro, where you'll find a total of 11 detailed tips on Sezzle's financial health and market performance.
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