Klarna, which is a leading buy-now-pay-later provider (BNPL), has partnered with OnePay, a finance app backed by retail giant Walmart (WMT), in order to offer installment loans to U.S. shoppers. This partnership replaces competitor Affirm (AFRM) as Walmart’s fast credit option and significantly expands Klarna’s presence in the U.S. market. Indeed, Klarna’s CEO labeled the deal as a “game changer” that will give the company access to Walmart’s millions of customers. As part of the partnership, Klarna will be integrated into OnePay and allow customers to use the BNPL option at online and physical Walmart checkouts.
The integration is expected to roll out later this year, at which point Klarna will become the exclusive provider of installment loans for Walmart. This development is a blow to Affirm, and its shares dropped by as much as 14.6% following the announcement. However, Affirm stated that its partnership with Walmart accounted for approximately 5% of its gross merchandise volume and 2% of its adjusted operating income in the six months through December. It also stated that products are still available through direct-to-consumer channels like the Affirm Card.
Separately, it is worth noting that Klarna recently filed for a U.S. initial public offering (IPO), where it is looking to raise at least $1 billion at a valuation of over $15 billion. The firm’s revenue increased by 24% last year, with a net income of $21 million on revenue of $2.81 billion. In addition, the company has roughly 93 million customers globally and more than 675,000 merchants on its platform. Klarna’s deal with Walmart will undoubtedly draw more interest to its IPO.
Is AFRM Stock a Buy?
Since Klarna is not publicly traded yet, we will instead look at Affirm Holdings, its biggest competitor. AFRM stock has a Moderate Buy consensus rating based on 11 Buys and six Holds issued in the past three months. Furthermore, the average AFRM price target of $74.08 implies 60.5% upside from current levels.
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