Sezzle Q1 2026: Growth Continues, But Structural Risks Remain

What happened

Sezzle reported Q1 2026 results, extending its streak of strong revenue and volume growth, but the earnings call revealed continued reliance on consumer fees and rising credit provisions. Management reiterated guidance and emphasized the buyback program, projecting confidence. However, underlying credit metrics and regulatory overhang remain unresolved, threatening the high-valuation thesis. The market's reaction likely reflects a mixed picture of solid execution against escalating quality-of-earnings concerns. This earnings call does not alter the fundamental risks embedded in the current premium valuation.

Implication

Despite another quarter of headline growth, Sezzle's earnings quality remains tethered to fee income and loose underwriting, vulnerable to regulatory and credit cycle shifts. The $100M buyback continues but does not address structural risks of growing receivables and rising provision ratios. Current valuation near 27x trailing EPS requires sustained 60%+ revenue growth and low-30s EBITDA margins, which appear increasingly difficult to maintain as credit losses creep higher. Any growth deceleration or negative regulatory development could trigger multiple compression toward the bear case of $55. Until credit metrics stabilize below 2.75% of GMV and fee dependence diminishes, the risk-reward skews unfavorable.

Thesis delta

The Q1 2026 call reinforces our existing thesis: Sezzle executes well near-term, but underlying credit and regulatory risks are not fading. The bull case depends on these risks staying dormant, a fragile assumption. We see no reason to upgrade; the stock remains a potential sell at current levels.