Sezzle Stock Ascends 219% YTD: Should You Play or Let It Go?

Sezzle Inc.’s SEZL stock has jumped a whopping 218.5% in the year-to-date period. This upsurge significantly outperforms the industry’s 2.5% growth and the 5.8% rise in the Zacks S&P 500 Composite.

YTD Price Performance

SEZL outpaced its industry peers, Global Payments GPN and Corpay CPAY. Global Payments and Corpay have declined 29.1% and 3.6% in the year-to-date period, respectively.

Sezzle's exceptional performance is demonstrated over the past three-month time frame as well. The SEZL stock has surged 217.8% surpassing Global Payments' 5.5% decline and Corpay’s 6.4% growth.

SEZL’s striking performance over the year-to-date period or three months makes the stock the talk of the town. Having said that, whether investors should ride the rally or stay away from it needs to be evaluated. Let us delve deeper to arrive at a conclusion.

Product Breakthroughs: Sezzle Growth Engine

SEZL launched On-Demand in October 2024, giving users the flexibility to Pay-in-4 wherever Visa is accepted. This shift gradually lessened the challenges of its direct merchant partnership, transforming the company into a Buy Now, Pay Later (BNPL) solution that works anywhere. After launching this product, the company reached 707,000 Monthly On-Demand & Subscribers (MODS) by the end of December 2024. Although MODS slowed down to 658,000 in the first quarter of 2025, we expect the number to increase as seasonal effects lessen.

The expanded utility of this product propelled user engagement and gross merchandise volume (GMV). With customer purchase frequency rising to 6.1 times in the March quarter from 4.5 times in the year-ago quarter, signaling enhanced user engagement, the top line and GMV witnessed massive year-over-year upsurges of 123.3% and 64.1%, respectively.

Recently, the company launched a suite of features to enable consumers to steer through the tariffs and recession-led financial pressure. The company eased the repayment process for consumers by introducing Sezzle Balance, and since the launch, shoppers have loaded $65 million, portraying strong adoption and trust. Other features, such as Express Checkout and Browser Extension, are anticipated to assist merchants in improving conversion rates and make saving effortless for shoppers.

Sezzle has disclosed that nearly 17% of users saved more than $50 on their recent purchase using its tools. Furthermore, 43% of users reported saving at least $5. That being said, the company’s chairman and CEO, Charlie Youakim, said, "When shoppers see real savings, they come back — it's that simple,". Banking on this statement, we expect the company to make moves in terms of product innovations that promote consumer savings, thereby boosting top line on the account of higher purchase frequency.

SEZL’s Outstanding Profitability & Liquidity Position

Return on equity (ROE) is a profitability metric that assesses how effectively a company utilizes shareholders' equity to generate earnings. By the end of the first quarter of 2025, SEZL registered a remarkable ROE of 114.4%, exceeding the industry’s 48.5%. That being said, the company’s return on invested capital of 63.5% exceeds the industry’s 22.2% by a significant margin. These metrics testify to Sezzle’s efficient operations and ability to convert capital into earnings.

The company’s liquidity position is also impressive. With a current ratio of 2.62 in the first quarter of 2025, it significantly exceeds the industry’s 1.15. Additionally, this metric has improved from the previous quarter’s 2.44 and the prior-year quarter’s 2.06. This strong growth, combined with a ratio above 1, indicates that the company can easily meet its short-term debt obligations.

Sezzle’s Robust Top & Bottom-Line Prospects

The Zacks Consensus Estimate for SEZL’s 2025 sales is $441.8 million, suggesting a 63% year-over-year upsurge. The same is anticipated to rise 25.3% in 2026. The consensus estimate for earnings is set at $3.26 per share for 2025, hinting at a 77.2% year-over-year surge, with an additional 30.4% increase expected in 2026.

Valuation Concerns Over SEZL

Sezzle shares appear pricey, which may be unappealing to investors. The stock is priced at 35.82 times forward 12-month earnings per share, which is higher than the industry’s average of 21.88 times.

When looking at the trailing 12-month EV-to-EBITDA ratio, OPFI is trading at 42.32 times, way above the industry’s average of 13.32 times.

Increasing Regulations Strain Sezzle

The BNPL sector has grown exponentially, banking on less stringent regulations than traditional credit. However, the scenario is slowly changing, as concerns over consumer debt, dispute resolution, and transparency are prompting the Consumer Financial Protection Bureau (CFPB) to scrutinize.

The interpretive rule issued by the CFPB in May 2024 would have classified BNPL providers as credit card issuers. This rule would have subjected companies like SEZL to credit-card-like protections. However, recently, the CFPB announced that it would not enforce this rule and is considering invalidating it.

Although the developments above may sound optimistic, despite the federal pullback, some states, including New York, are implementing their BNPL rules and regulations. This may impact the company by increasing compliance costs, requiring stricter affordability checks, and restricting certain aspects of the business model. Customer acquisition may slow down, and operating expenses may rise, affecting the overall bottom line. A restrictive regulatory environment is concerning for investors.

Hold SEZL for Now & Wait for Further Developments

Sezzle’s product innovation tactics are cornerstones of its growth trajectory. Be it “On-Demand” or Sezzle Balance, the company’s products have shown a positive impact on its consumer engagement, boosting its top line. This fundamentally strong stock wears the garb of healthy profitability and liquidity, piquing investors’ curiosity.

On the flip side, the stock is overvalued, trading significantly above the industry average. Such valuation concerns coupled with increased regulations curb investors’ interest. Therefore, we recommend that long-term investors retain their positions since it will be risky to pursue the stock at these levels. Post a pullback and valuation reset, an entry point may emerge, making it advantageous for investors.

SEZL currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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