Is Klarna Stock a Bargain Buy for Patient Investors in a BNPL Market at a Crossroads?

The buy now, pay later (BNPL) sector has long been a battleground of innovation and skepticism. Klarna, the Swedish fintech giant, sits at the center of this debate. With a stock price that has fallen below its IPO price of $40 and a market valuation of $13–14 billion, the question for patient investors is whether this represents a mispricing opportunity or a cautionary tale of overhyped growth. To assess Klarna's long-term value proposition, we must dissect its financial performance, the evolving BNPL landscape, and the structural risks that define this sector.

Growth Drivers: Revenue Surge and Strategic Expansion

Klarna's Q3 2025 results underscore its dominance in the BNPL space. Revenue hit $903 million, a 28% year-over-year increase, driven by a 43% surge in U.S. gross merchandise volume (GMV) to $32.7 billion. The Klarna Card, launched in 2024, has achieved 4 million signups in four months, accounting for 15% of global transactions in October. These metrics highlight the company's ability to innovate and capture market share, particularly in the U.S., where interest-bearing products like Fair Financing loans are growing at a staggering 244% YoY.

The broader BNPL market is also expanding, with global GMV projected to reach $560.1 billion in 2025, growing at a 13.7% annual rate. Klarna's focus on AI-powered digital banking and partnerships with major retailers positions it to benefit from this tailwind. However, growth alone is not a sufficient metric for long-term value.

Profitability Challenges: A Tale of Deferred Gains and Credit Risks

Despite robust revenue growth, Klarna reported a net loss of $95 million in Q3 2025, a sharp decline from a $12 million net income in the same period in 2024. Operating losses widened to $83 million, driven by upfront provisions for credit losses and the lag in recognizing revenue from these provisions. This highlights a critical tension in the BNPL model: the need to balance aggressive growth with prudent risk management.

The sector's inherent risks are amplified by consumer behavior. Data from Morgan Stanley indicates that 34–41% of BNPL users reported late payments in the past year, with Gen Z users showing a 51% delinquency rate. The average BNPL loan balance of $760, coupled with frequent borrowing (6.3 loans per lender in 2023), raises concerns about debt accumulation. For Klarna, these trends could strain its credit provisions and erode margins, particularly as it expands into higher-risk segments like interest-bearing loans.

Market Volatility and Analyst Skepticism

Klarna's stock price has declined 31.6% year to date, closing at $38.31 in September 2025-below its IPO price. This volatility reflects broader macroeconomic headwinds, including rising interest rates, which directly impact BNPL firms' funding costs. Analysts are divided: some view Klarna's pivot toward financial services as a strategic upgrade, while others argue its valuation implies unrealistic margin improvements.

The sector's challenges are compounded by regulatory scrutiny. The Consumer Financial Protection Bureau (CFPB) has flagged BNPL's potential to distort credit reporting and mask debt risks. Meanwhile, competition from Affirm and PayPal-both of which have secured stronger investor confidence-adds pressure on Klarna to differentiate its offerings.

Valuation Realities: Overhyped or Undervalued?

Klarna's current valuation of $13–14 billion hinges on its ability to transition from a BNPL provider to a full-fledged digital bank. However, intrinsic value analyses suggest the stock is overvalued, with price-to-sales multiples implying optimism not supported by fundamentals. For patient investors, the key question is whether Klarna can achieve profitability without sacrificing its growth trajectory.

The company's Q4 2025 guidance-projecting $1.065–1.080 billion in revenue and $37.5–38.5 billion in GMV-offers a glimmer of hope. Yet, profitability remains elusive. If Klarna can reduce credit losses and scale its higher-margin products (e.g., Klarna Card), it may justify its valuation over time. Conversely, a deterioration in consumer credit behavior or regulatory crackdowns could exacerbate losses.

Conclusion: A Calculated Bet for the Long-Term

Klarna's stock is neither a clear bargain nor a guaranteed disaster. For patient investors, the decision to buy hinges on three factors:
1. Execution of Strategic Pivots: Can Klarna successfully transition to a diversified financial services platform while managing credit risks?
2. Macroeconomic Resilience: Will rising interest rates and inflationary pressures derail BNPL adoption?
3. Regulatory Outcomes: How will policymakers address the sector's risks without stifling innovation?

The BNPL market is at a crossroads, and Klarna's fate is intertwined with its ability to navigate these challenges. While the current valuation appears stretched, the company's innovation and market leadership offer a compelling case for long-term optimism-provided investors are prepared to weather volatility and credit cycles.