KLAR Stock Forecast & Price Target

Klarna has demonstrated notable financial improvement, with a significant reduction in net charge-offs since 2022 due to enhanced underwriting models and a growing presence in markets like the US and the UK. The company has successfully expanded its merchant base by more than 201,000, representing a 34% year-over-year increase in the second quarter, indicating strong demand for its payment solutions. Additionally, the buy now, pay later (BNPL) market in the United States is projected to reach $116.7 billion in 2023, reflecting a year-over-year growth of 19.2%, with an expected compound annual growth rate of 12% leading to an estimated value of $163.8 billion by 2028, underscoring the potential for continued growth in Klarna's business model.

Klarna reported realized losses of 0.45% as a percentage of Gross Merchandise Value (GMV) in the second quarter of 2025, reflecting a slight year-over-year decline of 3 basis points. Additionally, there have been indications that GMV per merchant has been declining over recent quarters, largely due to new partnerships with Payment Service Providers (PSPs) that are attracting smaller retailers at the expense of larger brands. These factors create a concerning outlook for Klarna, as persistent losses and declining merchant performance may jeopardize the company's growth in a competitive digital payment landscape.