Klarna Group plc (KLAR): A Bull Case Theory 

We came across a bullish thesis on Klarna Group plc on P14 Capital’s Substack. In this article, we will summarize the bulls’ thesis on KLAR. Klarna Group plc’s share was trading at $29.00 as of January 16th. KLAR’s forward P/E was 54.35 according to Yahoo Finance.

Klarna Group plc operates as a digital bank and flexible payments provider in the United Kingdom, the United States, Germany, Sweden, and internationally. KLAR’s investment case centers on a disconnect between near-term reported margins and the company’s underlying earnings power as it scales Fair Financing and leverages its banking model.

Provisioning for credit losses has weighed on transaction margins because losses are recognized upfront while interest income accrues over time, creating a temporary profitability lag that the market is treating as structural. As Fair Financing cohorts mature, recurring interest income should outpace provisioning, with provisions expected to stabilize as a percentage of GMV in FY26–27.

Holding loans on balance sheet is structurally attractive given Klarna’s low-cost deposit funding, and forward-flow agreements, such as the Elliott deal, help smooth quarterly volatility by offsetting provisioning with gains on sale. Funding costs have risen modestly due to startup frictions and deposit repricing but are expected to decline as scale benefits emerge. Combined, these dynamics support meaningful transaction margin expansion into the low-40% range over the next two years, with upside from high-margin advertising and subscription revenues.

Operating leverage remains a key strength, driven by aggressive AI adoption and disciplined headcount management. Sales and marketing, customer service, and G&A are all expected to decline as a percentage of revenue, while AI-enabled efficiency continues to lift adjusted operating income margins toward management’s long-term targets.

On the demand side, Klarna is benefiting from strong BNPL adoption and clear consumer traction, particularly in the U.S., as reflected in accelerating app downloads, rising monthly active users, and share gains versus peers. This consumer resonance underpins the “social arbitrage” thesis that market multiples lag real-world adoption.

Valuation remains compelling, with Klarna trading at a steep discount to peers on price-to-transaction-margin dollars despite faster growth and greater margin optionality. While risks include consumer weakness, credit volatility, regulatory changes, FX exposure, and a large March 2026 lockup expiration, the base case points to substantial upside as margin skepticism fades and growth inflects in 2026.

Previously, we covered a bullish thesis on Sezzle Inc. (SEZL) by Next’s Substack in May 2025, which highlighted the company’s rapid revenue growth, strong net margins, founder-led alignment, and proprietary BNPL underwriting driving asymmetric upside. SEZL’s stock price has depreciated by approximately 23.97% since our coverage due to broader market skepticism around BNPL and credit risk. P14 Capital shares a similar focus on BNPL growth but emphasizes Klarna’s margin dynamics, Fair Financing scale, and AI-driven operating leverage.

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Disclosure: None.