In a recent segment, CNBC’s Jim Cramer shared his insights on Klarna, the newly public Swedish online lender that specializes in buy now, pay later (BNPL) products. Following a successful debut that saw shares open at $52 and climb 14.55% by the close, Cramer expressed his belief that Klarna represents a worthwhile investment opportunity, even though it experienced a significant initial surge in value.
Cramer noted that while Klarna’s stock performed impressively on its first trading day, it hasn’t reached an exorbitant valuation, suggesting that the numbers behind the company are promising. However, he did acknowledge a preference for Klarna’s primary competitor, Affirm, when weighing investment options.
Klarna stands out not only for its BNPL services but also for its diverse range of offerings. The company generates revenue not just from transaction and service fees, but also through advertising, budgeting tools, and traditional lending interest payments. Cramer remarked on the company’s strong credit quality and its “impressive underwriting standards,” which are managed through an automated process.
Highlighting Klarna’s business trajectory, Cramer pointed out that the company was profitable for several years before making a strategic decision in 2019 to prioritize growth. Since then, although it has faced losses, Klarna has expanded into 12 new markets and intensified its focus on growth within the United States. According to Cramer, recent management statements indicate a trend toward improving profitability in 2023, a development that excites investors.
Despite his generally optimistic outlook, Cramer had some reservations about Klarna’s IPO structure. He noted that a significant portion of the shares sold during the IPO belonged to existing shareholders rather than the company itself. Cramer emphasized that he typically prefers companies to use IPOs as a means to raise funds for growth, rather than serving as an exit strategy for venture capitalists. However, he also recognized that Klarna appears to be in a strong position and does not currently require additional capital.
Cramer praised Klarna’s maturity as a company, referencing its 20-year history and asserting that it is well-prepared for public markets. With a valuation exceeding $17 billion, he expressed confidence in the firm’s potential for future growth, particularly in light of the success of its publicly traded competitors such as Affirm and Sezzle, both of which are already profitable.
In conclusion, while acknowledging some concerns regarding Klarna’s IPO dynamics, Cramer ultimately conveyed a positive outlook for the company and its trajectory within the booming IPO landscape.
