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While the mega-cap giants are driving equity indices towards all-time highs, several other quality stocks across sectors are flying under the radar. One such small-cap fintech stock is Sezzle (SEZL), which has gained over 334% in 2024.
Valued at $509 million by market cap, Sezzle listed directly on the Nasdaq last August, and the shares are up about 10% from their volatile Day 1 highs. Let’s see if the tech stock is a good buy right now.
Is Sezzle a Good Stock to Own in 2024?
Sezzle operates in the buy now, pay later (BNPL) segment, and ended 2023 with sales of $159.4 million, up from $58.8 million in 2020. Launched in 2017, Sezzle built a payments platform that allows merchants to offer consumers a flexible alternative to traditional credit. In fact, Sezzle claims to be the only BNPL platform in North America to offer credit reporting optionality through short-term Pay-in-4 installments.
While its peers are struggling with mounting losses, Sezzle has reported GAAP (generally accepted accounting principles) net income for every quarter since Q3 of 2022. In Q1 of 2024, Sezzle increased top-line growth by 35.5% year over year to $47 million. Its net income stood at $8 million, higher than the $7.1 million it posted for all of 2023. Sezzle’s net income indicates it reported a net income margin of 17%, resulting in a 31% return on equity for the quarter.
Its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $15 million indicated a margin of 32%, and came in significantly higher than the year-ago EBITDA figure of $8.3 million.
Sezzle ended the March quarter with 371,000 subscribers, an increase of 64,000 year over year. Its consumer engagement remains high, as the top 10% of consumers transacted an average of 53 times per year. Sezzle’s strong Q1 results allowed the company to raise its net income guidance to $30 million, up from $20 million.
What's the Target Price for Sezzle Stock?
The key driver of a company’s stock price is its potential for revenue and earnings growth. In the case of Sezzle, its growth is tied to the expansion of its subscriber base. The company emphasized that its new members are shopping at general merchandise retailers, grocery stores, and restaurants to meet discretionary needs. It seems that buy now, pay later products are a modern adaptation of credit in the ever-evolving consumer finance landscape.
Just a single analyst currently tracks Sezzle stock, with a "strong buy” rating. The price target of $113 indicates expected upside of over 26% from current levels.
Analysts expect Sezzle to increase sales to $200 million in 2024 and $236.5 million in 2024. Its adjusted earnings are forecast to improve from $4.89 per share in 2024 to $7 per share in 2025. So, priced at less than 3x forward sales and 18.8x forward earnings, this small-cap fintech stock is really cheap.
If the stock is priced at 20x forward earnings, it should trade at $140 in the next 12 months, up from the current price of $90.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
