Klarna Bets on U.S. Expansion and Installment Financing to Drive a Valuation Rebound

Analysis

The poster argues that buy-now-pay-later company Klarna (KLAR) is undervalued at a share price of about $12.50 and a market capitalization of about $4.7 billion. The poster predicts that the stock could reach $20–$25 around the release of fourth-quarter 2026 results in February 2027; if the thesis takes longer to play out, the release of first-quarter results around May 2027 would be a repricing window under a weaker scenario. These are the author's price estimates, not company guidance. The case begins with growth and profitability: second-quarter 2026 revenue rose 27% year over year to $1.042 billion, transaction margin dollars (TMD) grew 42% to $446 million, adjusted operating profit was $91 million, operating profit was $27 million, and net profit was $9 million. The poster uses these figures to estimate a price-to-sales ratio of about 1.1 and a 2027 forward price-to-earnings ratio of about 15–25, using Affirm (AFRM) during its earlier loss-making period as a valuation comparison. But the comparison does not align revenue, risk, and funding measures, and no calculation model is provided for the forward earnings multiple. The author sees longer-term, interest-bearing installment financing for larger purchases through Fair Financing as the key to improving margins: second-quarter transaction volume for the product was $4.7 billion, up 82% year over year and accounting for 13% of total transaction volume. A rising share could help TMD grow. However, the post's claim that Klarna began focusing on it in November 2025 is inaccurate; company materials show the product launched in the second quarter of 2025. The author's direct comparison of Klarna's overall revenue-to-transaction-volume ratio of about 2.85% with Affirm's roughly 8% ratio is also insufficient to establish a difference in product margins. The second growth driver is the U.S.: local revenue rose 37% in the second quarter and accounted for about 36% of total revenue, while transaction volume represented only about 22% of the global total. The poster expects further regional growth and hopes the J.P. Morgan Payments channel and an Apple device-leasing partnership will increase usage, but announcing partnerships does not mean incremental transaction volume or profit has already materialized. The third driver is customer monetization: Klarna has about 120 million active consumers and 6.5 million active Klarna Card users, and memberships, cards, and banking products could increase usage frequency. The post estimates that the card business contributes about $10 million in quarterly revenue but provides no verifiable breakdown. The poster also views share purchases of about $10 million by the CEO and about $50 million by chair Michael Moritz as signs of confidence, and expects Klarna's subsidiary PriceRunner to receive about $2 billion in cash from its lawsuit against Google (Alphabet, GOOGL). This is the most significant flaw: $1.97 billion is the amount of a judgment that can still be appealed, not a settlement or cash certain to flow to Klarna. Any final proceeds would also be reduced by distributions to former shareholders and litigation funders, as well as taxes. Other risks include weak German consumer demand that prompted cuts to full-year transaction-volume and revenue guidance, credit losses and funding costs, changes in interest rates, and CFO and CMO transitions in early 2027. The poster interprets the transitions as necessary for the U.S. business strategy, but that is a personal judgment. The company expects the third quarter to be an investment period and fourth-quarter TMD to be stronger; subsequent results must still validate that outlook. The author discloses holding about $50,000 in January 2028 call options with $10, $12.5, and $15 strike prices that are currently at an unrealized loss. The post has no image attachments.

Discussion Summary

The comment section remains divided. Bulls believe KLAR’s financial performance and partnership progress have improved, but its valuation has not risen accordingly. The original poster replied that execution over the coming months is key, with a potential catalyst in third- or fourth-quarter earnings. Critics questioned management turnover, how much profit KLAR retains from its profitable installment business, how it makes money from the zero-interest Apple partnership, and the risk of consumer defaults. Some also worried about the earlier downward revision to expectations, further rate hikes, and continued pressure on the stock price. These business-related concerns are largely commenters’ claims and remain insufficiently substantiated; the assumption about litigation recoveries has not received substantive discussion.

Fact Check

• supported: Second-quarter 2026 revenue grew about 27% and TMD grew about 42%; adjusted operating profit was $91 million, operating profit was $27 million, and net profit was $9 million. — The amounts and growth rates match the company's disclosures. TMD and adjusted operating profit are non-IFRS measures; the original post's description of the profits as GAAP figures is imprecise.
• questionable: Fair Financing accounted for 13% of second-quarter transaction volume, grew 82% year over year, and was launched or became a focus in November 2025. — The earnings materials support the 13% and 82% figures, but the company says the product launched in the second quarter of 2025, making the post's timing misleading.
• supported: Second-quarter U.S. revenue grew 37% year over year and contributed about 36% of total revenue and about 22% of transaction volume; partnerships with J.P. Morgan Payments and Apple have been announced. — Company materials support the revenue and transaction-volume shares and the partnerships. Any incremental profit from the partnerships remains a forecast.
• unsupported: PriceRunner's case against Google has been settled, and Klarna is likely to receive about $2 billion in cash. — What has been announced is a favorable first-instance judgment of about $1.97 billion, not a settlement guaranteeing payment. The judgment can be appealed, and any final proceeds are subject to distributions and taxes.
• supported: The CEO purchased about $10 million in shares in August 2026, and chair Michael Moritz purchased about $50 million in shares in March. — SEC filings and a company announcement confirm the transactions. The purchases alone do not validate the author's conclusion that the stock is mispriced.
• supported: Weak demand in Germany prompted the company to lower its 2026 transaction-volume and revenue guidance, while the third quarter would be an investment period. — The company did lower its transaction-volume and revenue guidance, citing German transaction volume and foreign exchange as contributing factors, and expects increased investment in the third quarter. The guidance alone does not eliminate execution risk.