Sezzle (SEZL, Financial) shares experienced a decline, falling by 1.91%, as the stock is currently priced at $249.33. The drop might be associated with the negative sentiment stemming from a prior stock offering and critical analysis from Hindenburg Research, impacting investor confidence.
Sezzle (SEZL, Financial) has seen a significant transformation in 2024, turning around from its previous steep losses to impressive profits. This shift propelled its stock price to increase over 2,000% for the year by November. However, the decision by management to initiate a stock offering, aimed at capitalizing on this upswing, has led to concerns about potential dilution, which often results in a decrease in the share price.
The Hindenburg Research report poses the most substantial impact on Sezzle's (SEZL, Financial) stock, questioning the sustainability of its business model. Operating as a "buy now, pay later" platform, Sezzle earns revenue mainly from merchant fees and recently, from its subscription service providing additional features. The report raises concerns about the company's approach of targeting users with poor credit and funding these high-risk users at high-interest rates, thus challenging the business model's viability.
Sezzle's (SEZL, Financial) subscription service, launched in July 2023, is gaining attention with 529,000 active users. Despite a boost in reported net income, there are suggestions that some user sign-ups may be unintentional. Continued growth in this sector is crucial; any stagnation could affirm the criticisms raised by Hindenburg.
From a valuation standpoint, Sezzle (SEZL, Financial) currently holds a price-to-earnings (P/E) ratio of 26.52, indicating a relatively expensive valuation compared to the industry's median. Its price-to-book (P/B) ratio stands at 22.75, suggesting that the stock might be overvalued in terms of its book value. Furthermore, the GF Value analysis categorizes Sezzle as "Significantly Overvalued" with a GF Value of 41.14. More details about the GF Value can be accessed here.
Despite the potential growth in earnings with a projected growth rate of 604.9% in the past year and a strong Altman Z-score of 6.1, warning signs like frequent issuance of new debt and the higher-than-average Beneish M-Score suggest possible financial manipulation. Such factors demand careful monitoring by investors.
