Welcome back!
We originally did a deep dive on KLAR 0.00%↑ in Deep | Klarna: Inflection Point? which we invite you to (re)visit.
This was back in May after the shares had dropped over 60% post-IPO.
The thesis was based on Klarna being oversold relative to a broadly misunderstood balance sheet risk profile and profitability trajectory.
Shares subsequently rallied +40% before fully retracing this week on the back of Q2 results where we got:
FY26 top-line (GMV/Revenue) guidance cut down to ~17% growth
Departure of CFO/CMO announced
Despite this, Q2 was a material beat on profitability (TMD and AOI) including FY26 TMD guidance being raised.
This wasn’t the first “botched” guidance from Klarna, which continues to undergo growing pains as a listed Company, inviting steep execution discounts.
While scepticism is warranted, we find that most of our original thesis remains intact (and supported by recent developments) with the R/R at these levels arguably more attractive vs. our original entry.
This is especially true post the >$1B in expected net proceeds (25% of mkt. cap) from the Google litigation which we wrote about here.
At just $2.8B Adj. EV (see calculation below) we view the 85% discount vs. Affirm’s 26E TMD multiple as overly penalising.
At these levels, we are buying this difficult to replicate two-sided network at a normalised 28E adj. EBIT of just under 3x.