Sezzle's Q4 Earnings Preview Highlights Growth Amid Elevated Risks and High Valuation

What happened

Sezzle Inc. is preparing to report its Q4 2026 earnings, with a Zacks article forecasting 30% revenue growth and 31% EPS increase, driven by deeper engagement and new product features, extending its earnings beat streak. This optimistic outlook contrasts with the DeepValue master report's 'POTENTIAL SELL' rating, which notes Sezzle trades at rich multiples of 27x trailing EPS and 33x EV/EBITDA, pricing in sustained 60%+ growth and low-30s EBITDA margins. Critical underlying risks include rising provision for credit losses, now at 27.5% of revenue in Q3 2025, and heavy dependence on consumer fees like late charges, which grew over 369% YoY early 2025. The report also warns of regulatory threats to BNPL fee structures and aggressive $100M buyback authorization without clear leverage guardrails, highlighting capital allocation concerns. The upcoming earnings will test whether Sezzle can deliver on growth forecasts while managing these vulnerabilities, as any disappointment could trigger significant downside given elevated market expectations.

Implication

The forecasted growth reinforces Sezzle's narrative as a high-performing BNPL fintech, but with shares at $77.17 and multiples embedding 60%+ growth, any revenue or EPS miss could spark volatility, as seen in past guidance resets. Key monitoring points include provision for credit losses relative to GMV—if it exceeds the 2.75% target—and whether delinquency fees continue outpacing GMV growth, signaling regulatory and quality-of-earnings risks. Aggressive execution of the $100M buyback amid deteriorating credit or regulatory news would raise red flags about capital allocation discipline and balance-sheet flexibility. Long-term, regulatory caps on BNPL fees and competitive pressures from larger players like Affirm pose headwinds that could compress EBITDA margins from the low-30s, undermining the high-growth thesis. Given the asymmetric risk-reward, trimming or avoiding positions at current levels is prudent until evidence of durable, fee-light growth and stable credit performance emerges.

Thesis delta

The Zacks preview aligns with the base case of sustained revenue growth but does not alter the core investment thesis, which remains cautious due to high valuation and rising credit and regulatory risks. It reinforces expectations for another earnings beat, but fails to address the critical vulnerabilities around fee dependence and potential capital misallocation highlighted in the DeepValue report. Thus, the 'POTENTIAL SELL' rating and downside scenarios remain unchanged, with investors advised to await actual Q4 results for confirmation of credit metrics and growth sustainability.