Citi and Wedbush have both initiated bullish coverage on newly public Klarna Group PLC, highlighting its expanding global footprint, strong growth trajectory, and long-term profitability potential within the Buy Now, Pay Later (BNPL) market.
Citi analysts initiated coverage with a 'Buy/High Risk' rating and a $58 target price, implying 42.5% upside from current levels.
The firm said it is “positive on Klarna and its opportunity for accelerated KPI growth within the relatively untapped, fast-growing BNPL industry.”
While acknowledging that “near-term profitability will be temporarily marred by elevated provisioning tied to its burgeoning Fair Financing business,” Citi expects margins to rebound in the 2026 financial year (FY26) as the business scales.
The analysts anticipate that “transaction margins will recover in FY26 as Fair Financing margins expand and Klarna accelerates growth in the US and underpenetrated countries in Europe.”
They added that upside potential could come from “the ramping of new large merchant wins, the enablement of payment service providers (PSPs) and greater adoption of the Klarna card.”
Wedbush is also optimistic, initiating coverage with an ‘Outperform’ rating and a $50 price target.
The brokerage described Klarna as “a leading global provider of alternative consumer payment solutions with a commanding share in Europe and rising position in the US.”
Wedbush sees “multiple drivers of durable gross merchandise value (GMV) growth over the intermediate term, including merchant product adoption, new vertical growth, international expansion, and new consumer touchpoints.”
The analysts expect Klarna’s GMV to grow at roughly 20% CAGR through 2028, significantly outpacing the broader eCommerce industry’s 6% growth rate.
They wrote that “as a tech-enabled bank at the center of the commerce ecosystem, we believe the network is well-positioned to gain share of both offline and online transactions despite rising intensity in Klarna's key growth markets.”
Wedbush also pointed to Klarna’s AI-enabled strategy as a key driver of future profitability, supporting “incremental transaction margin improvement and operating leverage at scale.”
At its current valuation, Wedbush said Klarna trades “below the average of alternative payment networks and at a considerable discount to its closest peer,” creating an attractive risk/reward setup.
They project Klarna’s EBITDA to grow at a 65% CAGR over the next three years, with significant margin expansion expected as newer markets mature.