Klarna (KLAR 9.49%) was a high-profile new arrival on the stock exchange in September 2025, after its initial public offering (IPO). Although the fintech, which offers term loans to consumers, is popular as a lender, it hasn't been an investor favorite. Since the company's market debut, its shares have lost about 24% of their value. The S&P 500 index, meanwhile, is up 7%.
That raises the question of whether Klarna stock is a beaten-down bargain or a value trap that has more room to decline. Here's my take on whether you should buy and pay immediately for the buy now, pay later (BNPL) specialist.
Pay it forward
The core of Klarna's business is BNPL, of course. Its signature BNPL service is the self-explanatory "Pay in 4." This spreads the cost of a purchase out to, yes, four interest-free payments, as long as the full amount is repaid within the mandated period, typically about six weeks.
Longer-term payback schemes (Fair Financing, as the company has collectively tagged them) carry interest. These closed-end loans, with terms usually ranging from six to 24 months, are designed for higher-cost goods and services.
Image source: Getty Images.
More than a few well-known businesses have Klarna BNPL options for checkout, and some might be surprising for the uninitiated. Travelers can Pay in 4 for Airbnb bookings, for example, as can hungry folks getting a meal delivered via DoorDash.
With these tailwinds, Klarna notched a new all-time high for quarterly revenue in its third quarter of 2025. The $903 million haul increased by a beefy 28% year over year.
The Sweden-based company is rightfully concentrating on the deep and vast U.S. consumer market. Gross merchandise value (GMV) in the U.S. alone zoomed 43% to contribute generously to the overall GMV tally of $32.7 billion.
The operational figures looked quite good, too, with a 38% increase (to around 850,000) in the total number of merchants hooking in to Klarna's services, and a 32% increase in active customers.
NYSE: KLAR
Key Data Points
Banking on change
In its press release trumpeting that third-quarter performance, Klarna described itself as a "digital bank." That's quite a telling indication of its ambitions. Rather than concentrate relentlessly on the company's BNPL activities, management has been busy over the years broadening the business.
Banking is only one of these. The company also announced last November that it would jump on the stablecoin bandwagon with its own cryptocurrency, KlarnaUSD. While this is more of an attempt to save costs than generate revenue, it could be a significant bottom-line booster if deployed smartly and managed effectively.
Does all this make Klarna a compelling stock for investors to own? BNPL is one of the hottest consumer fintech innovations in recent times, almost inarguably, and it's taking an increasingly larger chunk of commerce.
According to Adobe Analytics, the two-month stretch from Nov. 1 to Dec. 31 covering both Black Friday and the winter holidays saw total retail spend of almost $258 billion in the U.S. That was a less than 7% increase year over year. However, BNPL purchases totaled $20 billion, representing a nearly 10% gain.
There's a long runway here. Many researchers are forecasting robust growth into the future. For example, late last November, ResearchAndMarkets.com estimated that BNPL will advance at a compound annual growth rate (CAGR) of 8.5% from 2025 to 2030 in the U.S. It reached $109 billion in 2024, ResearchAndMarkets said, which should rise to more than $184 billion in 2030.
Yet the BNPL sector is hotly competitive, with Affirm and other peers (such as Block's Afterpay) battling for market share.
Consumer finance can be tricky, too. Reflecting this, Klarna's provisioning for credit losses more than doubled in the third quarter (to $235 million). Sales and marketing costs were considerably higher, also, as were technology and product development. These expenses were weighty and played a major role in the company's net loss of $95 million for the period.
Ultimately, I believe that as long as Klarna maintains its competitiveness and continues to score lucrative partnerships, it can outperform. A significant recent win in the partnership sphere was its replacement of Affirm as the sole provider for monster retailer Walmart's OnePay BNPL service.
Cheaper than many realize
As you might expect from an ambitious company in a still-young, competitive industry, Klarna's stock is expensive on certain key valuations. Its forward price-to-earnings (P/E) ratio is a very robust 59, and its price-to-sales (P/S) ratio lands just shy of 4. Yet some analysts are expecting not only profitability in the near future, but growth robust enough for the five-year price/earnings-to-growth (PEG) ratio to sit at a tiny 0.25. (Generally, a PEG ratio anywhere under 1 suggests a stock is undervalued).
I believe Klarna stock is a bargain. BNPL is an appealing option for any kind of consumer, especially the budget-constrained. It's also a model that should work in both good economic times and bad. The BNPL sector is sure to expand and, with a management team that keeps the company competitive and likes to innovate, Klarna is a fine play on that expansion.
