Klarna Group (KLAR 8.89%) went public last September in a celebrated initial public offering (IPO), one of the few lately. However, rather than offer the gains investors were hoping for, Klarna stock is down 56% since its first-day closing price. The company will provide its next business update for the 2025 fourth quarter on Feb. 19. Should you buy its stock now?
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A top player in BNPL
Klarna is a Swedish company whose main product is buy now, pay later services. It works with top brands you know and love, including being the sole BNPL provider for Walmart. It's best known for its Pay in 4 service, which splits up a purchase into four interest-free payments, but it has several other options, including longer payment plans with interest for more expensive purchases. It's also planning to expand into other financial services.
The business is thriving right now. Revenue increased 26% year over year in the third quarter, with a 23% increase in gross merchandise volume, including a 48% increase in the U.S. Customers are clearly finding value in using the company's services, and they're using it more and more. It had 4 million card signups in the quarter, and they accounted for 15% of total global transactions in October. It also had 27 million new users, a 32% increase, for a total of 114 million.
Fair Financing, its interest-based product, increased 244% year over year for U.S. gross merchandise volume. Merchant count increased 38% to 850,000. These numbers imply engagement and opportunity. The flip side of this growth is that it's still reporting losses. Net loss widened from $4 million to $94 million year over year in the third quarter, but much of that was related to the IPO.
Management says that revenue is growing faster than operating expenses, and it has a path to profitability.
NYSE: KLAR
Key Data Points
Is Klarna stock a bargain or a value trap?
Since Klarna is still reporting net losses, you can use a price-to-sales ratio for its valuation. Klarna is trading at only 2 times trailing-12-month sales, which looks like quite a bargain for an industry-leading company.
The market thinks Klarna is risky right now, and it is, considering the macro environment and its continued losses. Long-term, I do think that Klarna could bounce back and deliver value for shareholders, and if you have some appetite for risk, you can buy it right now and expect the stock to rise. However, don't necessarily expect that to happen before Feb. 19. If the news isn't good, the stock could continue to slide in the near term.
