What Next After Klarna’s IPO Story?

Anyone following Klarna’s story lately has questions on their mind like – whether the company’s growth and newfound profitability really back up its valuation, or if we’re still looking at more hype than hard numbers. For anyone new to it, Klarna (NYSE:KLAR) is a Swedish fintech best known for its “buy now, pay later” (BNPL) services, but it’s grown into a full payments ecosystem—handling checkout, financing, and even advertising for merchants. With over 100 million active users and partnerships with big retailers like Walmart and eBay, it’s become one of the most recognizable names in consumer finance.

When Klarna finally made its U.S. debut on September 10, 2025, it priced its IPO at U.S. $40 per share, raising about U.S. $1.37 billion and putting the company’s valuation at roughly $15.1 billion. On the first day of trading, the stock popped hard — it opened around $52, hit highs near $57.20, and then cooled off a bit to close the day at $45.82 (up 14-15% from the IPO price). So right out of the gate, investors gave it a warm welcome — the initial jump showed there was real appetite to pay a premium, but also signs that some of the pop was driven by first-day excitement rather than long-term conviction. But if you seek an upside with less volatility than holding an individual stock, consider the High Quality Portfolio. It has comfortably outperformed its benchmark—a combination of the S&P 500, Russell, and S&P MidCap indexes—and has achieved returns exceeding 91% since its inception. Separately, see – Opendoor – OPEN Stock To $9?

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On the surface, Klarna’s progress is impressive. In 2024, the company processed about $105 billion in merchandise volume, pulled in close to $2.8 billion in revenue, and—finally—posted a net profit of $21 million after years of red ink. That may sound small, but considering it lost over $200 million the year before, the turnaround is real. In Q2 2025 alone, revenue jumped to $823 million, Klarna added more than 111 million active users, and it now counts about 790,000 merchant partners. That’s a huge ecosystem, and it explains why big names like Walmart, eBay, and even Stripe are betting on Klarna’s checkout.

But peel back the layers and the story gets more complicated. Profitability, for example, is razor-thin. That $21 million profit works out to less than 1% net margin—hardly a cushion if things go sideways. Credit losses are better controlled than a year ago (around 0.5% of GMV in Q2 2025), but they’re still a big swing factor, especially in the U.S. where Klarna is pushing hard for growth. The U.S. is a double-edged sword: it’s Klarna’s biggest opportunity, but it’s also a higher-risk credit market. One uptick in consumer delinquencies, or a regulatory clampdown on late fees, and profitability could vanish quickly.

Competition is another wild card. Affirm, PayPal, Afterpay—everyone is gunning for the same merchants and the same users. Klarna’s partnerships with Walmart and eBay are a big win, but those deals often come with slim economics for the provider. Volume growth is great, but what matters for shareholders is whether Klarna can expand its “take rate” and keep margins intact.

So, does the valuation make sense? Revenue growth is strong, user engagement is high, and the merchant network is massive. But the margin of error is slim. Until we see Klarna consistently turn multi-hundred-million profits—not just squeak by—it’s fair to say the stock still prices in more optimism than the hard metrics support. If Klarna can prove it can scale profitably in the U.S., keep credit losses under control, and leverage those merchant partnerships into real, high-margin growth, then the bull case looks solid. But if not, we may find out just how thin the ice under this valuation really is.

Investors should be prepared for significant volatility and the potential for substantial losses if market conditions deteriorate or if the company fails to execute on its ambitious growth plans. While the 2x upside potential is mathematically sound based on projected revenues, it requires flawless execution in a rapidly evolving and competitive landscape. Now, we apply a risk assessment framework while constructing the Trefis High Quality (HQ) Portfolio, which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

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