We initiate coverage on SEZL with a Strong Sell rating and $120 PT. Sezzle Inc. operates a digital BNPL platform that allows consumers in the US/CAD to split purchases into four interest-free installments online and offline. Its rapid growth, driven by a pivot to recurring revenue and an enterprise merchant segment, puts it at the center of this market’s recalibration. Despite consensus optimism (SEZL has been a perpetual upside surprise and our FY26E EPS of $4.60 is 8% ahead of the Street), we believe investors are overlooking a fundamental premise shift in the macro and regulatory backdrops for high-multiple fintech. Valuations that once supported >53x forward P/E for names with rapid transaction volume growth and robust unit economics (70% margin; credit losses now controlled in the 2.5–3.0% range) made sense in the low-rate, free-capital regime that has passed. Today, persistent real rates and unprecedented state-level regulatory escalation signal an ongoing clampdown on multiple expansion, rising compliance costs and operational friction, especially as New York’s BNPL statute sets a precedent. Peer median benchmarks for payments and BNPL signal a far lower sustainable valuation anchor, and our justified 26x FY26E P/E implies a 31% downside, even assuming high execution. Subscription monetization and buybacks offer some durability, but a macro or credit surprise to the upside that would drive a rapid snap-back is unlikely. We see R/R as heavily skewed negative as repricing gravity reasserts and the stock leaves little margin for error on macro.
A Tightening Regulatory Clamp
We see acute multiple compression risk that the market continues to underestimate. Despite industry-