There are some phrases that strike terror in a heart. For businesses these days “Hindenburg Research” cannot be too far removed from that list, if it is not already there. The entity that left Nikola (NKLA) flailing and Icahn Enterprises (IEP) enraged now turns its attentions on payment platform Sezzle (SEZL). And the report hit like, well, a burning blimp full of hydrogen, sending Sezzle shares down nearly 25% in the closing minutes of Wednesday’s trading.
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Sezzle focuses on buy now pay later (BNPL) operations, the kind of which were so popular this time last year as inflation forced holiday shoppers to get creative or get very, very austere, whichever. And this year likely would have been no different, but the Hindenburg report noted a massive short-selling position and a whole host of potential issues for Sezzle itself.
The report noted that “…Sezzle borrows at a 12.65% interest rate to lend to extremely high-risk consumers whose credit is so bad that they are unable to access traditional credit cards.” Which by itself might not mean so much, as accessing traditional credit cards these days is something of a minefield in and of itself.
That interest rate to make high-risk loans seems like a calamity in the making, all right. But Sezzle was looking to make a go of it, having only recently hiked its forecasts on both revenue growth and full-year adjusted profit. How that will happen, with a GuruFocus report noting that Sezzle has been losing merchants—about 51% of them—since 2021, remains unclear.
A Second Wind
But Sezzle is not taking its losses lying down. Earlier reports noted that Sezzle got together with Bealls Inc. just recently to bring buy now pay later services to not only its online platform, but also to over 650 physical stores. This gives Sezzle access to a major new shopping platform right during the holiday shopping season, which is still up and running for about another week.
Throw in the fact that customers seem very enthusiastic about buy now pay later services—last year it accounted for $16.6 billion worth of sales—and Sezzle’s decision to take out high-interest loans to make high-risk loans of its own makes a sort of sense. But it is also easy to see where such a strategy could backfire, and given that, Hindenburg’s report makes just as much sense.
Is Sezzle Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on SEZL stock based on two Buys assigned in the past three months, as indicated by the graphic below. After a 1152.58% rally in its share price over the past year, the average SEZL price target of $326.50 per share implies 34.05% upside potential.
