:max_bytes(150000):strip_icc()/GettyImages-2234678050-e6759b39d46d425f96219176e06ebb4f.jpg "Here’s What These Analysts Think of ‘BNPL’ Company Klarna’s Stock After Its IPO")
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Key Takeaways
- Klarna shares received a “buy” or “outperform” rating from Deutsche Bank, Wedbush and Bank of America, which, respectively, gave shares a price target of $48, $50 and $51.
- The buy now, pay later firm is pursuing multiple avenues of growth and will likely benefit from broad consumer trends, such as the growth of e-commerce and digital wallets, analysts said.
Buy Klarna stock, analysts say, and it will pay off later.
Klarna (KLAR) shares, which closed Friday near $41, are poised to rise as the company’s business expands, analysts said. Deutsche Bank, Wedbush and Bank of America recently initiated coverage of the buy now, pay later provider, which went public about a month ago, issuing bullish ratings and price targets of $48, $50 and $51, respectively.
Those targets reflect optimism that Klarna shares, which sold for $40 in its IPO, can move back toward the $52 where they started trading on their first session. They subsequently climbed past $57—but have since come down to about $42.50.
“We think the risk/reward is attractive for a leading global commerce network with an early opportunity in several underpenetrated regions and further optionality to unlock incremental [gross merchandise value] and revenues through new partnerships and product expansion,” Wedbush wrote Monday.
What This News Means for Investors
Buy now, pay later has evolved from a niche option to a tool for everyday purchases like groceries and takeout. Its so widely used that Fair Isaac Corp. announced plans to incorporate BNPL transactions into its credit scoring framework. Analysts see BNPL become more ubiquitous as people embrace digital wallets and cards, and shop more online.
Klarna, which launched in 2005, built a following by allowing consumers to break up purchases into four interest-free installments. The company, like its rivals, started offering other types of short-term loans and bank-like services, and built an e-commerce platform.
The BNPL sector is expected to near $117 billion this year, Wedbush said, citing an eMarketer analysis. Klarna is currently the biggest player, with 111 million consumers and 970,000 merchants, Bank of America said, estimating that its rival, Affirm (AFRM), has 23 million customers and 377,000 merchants.
Klarna stands to gain customers by tapping new geographic markets, adding retail partners and bolstering newer products, such as its alternative to a debit card, Wedbush said. Broad consumer trends also bode well for the business, including the growth of e-commerce and digital wallets, analysts said.
Klarna’s app and website may be an overlooked source of ad revenue, Deutsche Bank said, estimating the digital advertising market in which it competes is a $475 billion space—larger than the payment services market, at $450 billion.
Klarna’s marketing arm leverages “a high-intent customer base, full-funnel attribution, and cross-category insights, tapping into advertising, search, and affiliate budgets,” Deutsche Bank wrote Sunday. “This allows Klarna to monetize its platform through impression-based, cost-per-click, and cost-per-action models.”
