Klarna (KLAR) Stock Forecast & Price Target

Klarna's stock outlook remains positive due to significantly improved net charge-offs, a result of enhanced underwriting models and successful operations scaling in key markets such as the US and UK. The company has experienced robust growth in its merchant base, adding over 201,000 new merchants (a 34% year-over-year increase) by leveraging direct integrations and partnerships, which bolsters its two-sided network. Additionally, the buy now, pay later market in the United States is projected to reach $116.7 billion in 2023, reflecting a 19.2% year-over-year increase, with continued growth anticipated at a 12% compound annual growth rate through 2028.

Klarna's financial outlook appears negative, primarily due to realized losses of 0.45% as a percentage of gross merchandise volume (GMV) in 2Q25, reflecting a slight decline of 3 basis points year-over-year. Additionally, a worrying trend is noted as GMV per merchant has been decreasing over recent quarters, likely influenced by partnerships with payment service providers that target smaller retailers rather than larger brand merchants. This decline raises concerns about the company's capacity to sustain growth in transaction value and profitability amid increasing competition from alternative payment options in a rapidly evolving financial landscape.