Klarna's stock has staged a modest recovery since its February earnings report, climbing from a year-to-date low of $12.30 to the current $20.68. The rebound faces a critical test next week when the company releases its second-quarter financial results, which will provide fresh insight into its business momentum.
BNPL demand fuels growth
Klarna operates in the buy now, pay later (BNPL) sector, competing with Affirm and Block's Afterpay. Unlike Affirm, Klarna holds a banking license in Europe and has applied for one in the U.S., giving it a distinct regulatory and funding advantage.
The company's model allows consumers to split purchases into installments, earning revenue through merchant commissions, interest, advertising, subscriptions, and receivable sales. This creates a mutually beneficial ecosystem: merchants gain sales, and customers gain payment flexibility.
In the first quarter, Klarna reported strong growth metrics. Active customers rose 21% year-over-year to 119 million, while merchant count surged nearly 50% to 1.07 million. Gross merchandise volume (GMV) climbed 33% to $33 billion, funded partly by customer payments and deposits thanks to its European banking status.
Revenue jumped 44% to over $1 billion, and net income reached $1 million, signaling improving profitability. Management expects this trend to continue, aided by better underwriting models that have reduced delinquency rates.
Q2 earnings expectations
Analysts project second-quarter revenue of approximately $996 million, near the upper end of Klarna's guidance range of $960 million to $1 billion. Given the company's historically conservative guidance, actual results may exceed expectations.
Several major banks have raised their price targets on Klarna stock. In July, Goldman Sachs, UBS, and JPMorgan lifted their targets to $25, $23, and $22, respectively, reflecting optimism about sustained growth.
Investors will also watch for updates on U.S. banking license progress and any changes in consumer credit behavior, especially amid broader economic uncertainty. The stock's recent performance mirrors trends seen in other fintech names, as short interest tests and post-earnings rallies have become common in the sector.
Technical outlook
From a chart perspective, Klarna stock has formed an ascending channel and currently sits slightly above its lower boundary. It has moved above the 50-day exponential moving average (EMA), and the Percentage Price Oscillator (PPO) remains above zero, indicating positive momentum.
However, the price action has also formed a bearish flag pattern, which often precedes a downside breakout. If that occurs, the stock could revisit the key support level of $12.30. The bearish scenario would be invalidated if the price breaks above the upper channel line.
Given the mixed signals, traders will likely focus on the earnings release for direction. A strong report could push the stock toward the upper channel, while a miss might trigger a selloff. As with any earnings event, volatility is expected.
This article is for informational purposes only and does not constitute financial advice.
