Sezzle's Bullish Growth Metrics Face Cautious Valuation and Risk Scrutiny

What happened

Sezzle reported strong Q3 2025 performance with 67% YoY revenue growth and 45% EPS growth, according to a Seeking Alpha article that rates the stock a Strong Buy with a $100 price target. The article highlights a forward P/E of 16x FY2026 EPS and a PEG ratio of 0.08 to argue for undervaluation relative to growth. However, the DeepValue master report maintains a HOLD stance, noting the stock screens full at a trailing P/E of ~27x and P/S of ~8x based on recent filings. Key risks from the report include seasonal volatility in loss rates, ongoing regulatory scrutiny, competitive pressures, and liquidity dependencies tied to a revolver and restricted cash. This divergence underscores a tension between optimistic growth projections and a risk-aware analytical framework that emphasizes caution.

Implication

The Seeking Alpha article's bullish case hinges on forward valuation metrics and growth, but investors must verify if these projections are sustainable amid seasonal credit volatility and regulatory uncertainties. Valuation discrepancies between trailing and forward multiples require scrutiny of earnings assumptions and whether they account for potential headwinds like Q4 charge-offs. Liquidity concerns, including reliance on a revolver and restricted cash, add financial risk that could constrain operations if funding conditions tighten. Competitive pressures from BNPL peers and card installments could erode margins, necessitating continuous innovation and market traction. Monitoring DeepValue's watch items—credit performance, subscription growth, regulatory developments, and merchant integration—is essential for any investment decision, as improvements here could justify a shift, but current risks warrant prudence.

Thesis delta

The new article suggests improved forward valuation and strong growth, potentially tilting the thesis towards a more optimistic view. However, without evidence addressing the DeepValue report's core risks—seasonal loss rates, regulatory scrutiny, and liquidity concerns—the overall stance remains neutral, as these factors could undermine growth sustainability. A shift to BUY would require demonstrated, sustained credit performance enhancements and favorable regulatory outcomes beyond the current data.