Klarna's Long-Term Growth Potential: Wall Street's Bullish Consensus and Financial Fundamentals

Wall Street analysts have issued a resoundingly positive outlook for Klarna Group (KLAR) in 2025, with a consensus rating of "Buy" and an average price target of $49.92, implying a potential 20.38% upside from its current price, according to analyst price targets. Out of 12 analysts covering the stock, six have assigned "Strong Buy" ratings, while three have labeled it a "Buy" and four a "Hold," per an Investing.com analysis. This optimism is underpinned by Klarna's strategic dominance in the expanding "buy now, pay later" (BNPL) sector and its accelerating financial performance.

Financial Fundamentals: Profitability and Growth

Klarna's recent financial results highlight its resilience and scalability. For Q2 2025, the company reported revenue of $823 million, marking its fifth consecutive quarter of operational profitability with an adjusted operating income of $29 million, in its Q2 2025 results. This represents a 19% year-over-year increase in gross merchandise value (GMV), which reached $25 billion in Q1 2025, and a 15% rise in like-for-like revenue to $701 million during the same period, as noted in a MarketBeat note. The company now serves 111 million active consumers and partners with 790,000 merchants, including high-profile additions like Walmart and eBay, per Business of Apps.

Notably, Klarna's risk management metrics have improved significantly. The delinquency rate for its BNPL product fell to 0.89% in Q2 2025 from 1.03% in Q2 2024, while realized losses as a percentage of GMV dropped to 0.45% from 0.48%, according to the Yahoo Finance income statement. These trends suggest stronger consumer repayment behavior and operational efficiency, which are critical for sustaining profitability in a capital-intensive sector.

Resolving Conflicting 2024 Net Income Figures

A key point of contention in Klarna's financial narrative is its 2024 net income. Yahoo Finance data indicates a net loss of $112 million for the full year, driven by high operating expenses ($2.025 billion) and a net non-operating interest expense of $412 million. However, the company's Q4 2024 results showed a net income of $3 million, and its 2024 annual report (released May 2025) may include revised figures. This discrepancy underscores the importance of reviewing finalized filings, as preliminary reports may not reflect adjusted earnings or one-time costs.

Despite the reported loss, Klarna's long-term growth trajectory remains intact. Revenue is forecast to grow at 19.6% annually-well above the U.S. market average of 9.8%-while earnings are expected to rise at a 55.6% compound annual growth rate, according to a Simply Wall St forecast. Analysts like UBS and JPMorgan have emphasized Klarna's global scale and first-mover advantage in the BNPL space, with UBS setting a $48 price target and JPMorgan a $50 target.

Debt and Leverage: A Cautionary Note

Klarna's debt-to-equity ratio rose to 55.53 in 2024, up from 45.76 in 2023 and 27.29 in 2022, according to MarketScreener ratios. This increase reflects aggressive investments in product expansion, including the Klarna Card in the U.S. and enhanced savings products in Europe. While higher leverage could pose risks, the company's expanding GMV ($105 billion in 2024) and improving profit margins provide a buffer against debt servicing costs. Investors should monitor cash flow statements-available via Klarna's investor relations page or the SEC's EDGAR system-for insights into liquidity management.

Strategic Expansion and Market Position

Klarna's product diversification and merchant acquisition strategy are key drivers of its long-term potential. The integration of Stocard users has accelerated consumer growth to 100 million active users, while merchant partnerships have surged to 724,000, with 150,000 added in Q1 2025 alone, per a Finextra report. These metrics position Klarna to capitalize on the BNPL sector's projected expansion, which is expected to grow at a double-digit rate through 2030 (Business of Apps).

Conclusion: Balancing Optimism and Caution

While Wall Street's bullish consensus reflects confidence in Klarna's market leadership and financial momentum, investors must weigh the company's elevated debt levels and recent net loss against its strong revenue growth and strategic initiatives. The resolution of conflicting 2024 earnings figures in the finalized annual report will be critical for assessing the company's path to sustained profitability. For now, Klarna's ability to reduce delinquency rates, expand its merchant network, and innovate in the BNPL space justifies the optimism-but not without vigilance.