Technology growth stocks have had a rough 18 months, and fintech firms were not exempt.
Swedish Buy Now, Pay Later firm Klarna was last in the news two months ago after raising funds at an 85% valuation haircut. ✂️
Today it’s back on our radar because its U.S. and international expansion is not going well. While the company made significant investments in growth, its revenues haven’t kept pace. In addition to its rising operating costs, credit losses rose more than 50% YoY to 2.9 billion Swedish krona as inflation and a weaker global economy impact consumers.
As a result, its pre-tax losses for the year’s first half ballooned to 6.2 billion Swedish krona, more than 3x the same period in 2021. 🔻
Much like other tech companies, it had to delay listing plans and must now stretch its runway until the IPO window reopens. Meanwhile, its publicly-listed competitors have also struggled as investors shy away from consumer-focused services. 🙅♂️
Recently, Affirm missed earnings and cut guidance for a key metric, gross merchandise volume, citing many of the same macroeconomic headwinds we’ve heard from many other companies this earnings season. 📉
For now, Klarna will have to return to its profitability roots to survive in the competitive BNPL space. We’ll have to see if its efforts are successful or if it runs out of funds before the market turns around. 👀