Here’s why the Sezzle (ASX:SZL) share price is down 10% today

Here’s why the Sezzle Inc (ASX:SZL) share price is sinking lower today despite delivering a record-breaking full year result for FY 2020…

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The Sezzle Inc (ASX: SZL) share price has come under pressure on Friday.

In morning trade, the buy now pay later provider’s shares are down 10% to $9.00.

Why is the Sezzle share price tumbling lower?

While Sezzle has released its full year results today, the catalyst for the selling appears to be weakness in the tech sector following a selloff on Wall Street overnight.

At the time of writing, the S&P/ASX All Technology Index (ASX: XTX) is down 4%.

What about Sezzle’s results?

Sezzle had another strong year and reported explosive growth in its underlying merchant sales (UMS) and total income.

For the 12 months ended 31 December, the company posted a 250.8% increase in UMS to US$856.4 million.

Thanks to a 39 basis points increase in its total income to UMS margin to 6.9%, Sezzle delivered a 272.1% jump in total income to US$58.8 million.

Combined with improvements in its cost of income and a decline in net transaction losses, this supported a 120 basis points increase in its net transaction margin (NTM) to 1.4%.

However, this NTM is still trailing its rivals. Yesterday Zip Co Ltd (ASX: Z1P) revealed that its US-based QuadPay business has a +2% NTM and Afterpay Ltd (ASX: APT) reported an NTM of 2.2%.

As with its peers, Sezzle’s operations are still making a loss. It recorded a loss after tax of US$31.9 million for the 12 months. This left it with total cash of US$89.1 million at the end of December.

Outlook

Positively, Sezzle revealed that 2021 is off to a strong start with UMS of US$117.8 million in January. This was 65.1% higher than the average monthly performance in 2020. It is also the company’s best monthly performance on record.

In light of this, the company is predicting further strong growth in FY 2021. It believes it will achieve an annualised UMS run rate in excess of US$2.5 billion by the end of 2021.

Sezzle CEO, Charlie Youakim, commented: “We are excited about the momentum in our business reflected in the velocity of signups for both consumers and merchants. 2021 is off to a good start, as January’s UMS of US$117.8 million was a record and 65% above our average monthly pace in 2020. We are also pleased to provide UMS guidance for Sezzle to achieve an annualized run rate UMS of US$2.5 billion by the end of 2021.”

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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