The Sezzle Inc (ASX: SZL) share price is an interesting proposition to think about considering the business is still seeing a very fast pace of growth right now.
Despite the business growth, Sezzle shares have actually declined by 28% over the last month.
How good was the Sezzle FY20 result?
Sezzle reported a number of different growth metrics for 2020 which showed rapid expansion of the business.
The 2020 underlying merchant sales (UMS) and total income increased by 250.8% and 272.1% year on year respectively.
Merchant fees, which represented 80.9% of total income for 2020, increased by 266.9% year on year.
Active consumers and active merchants reached 2.2 million and 26,700 respectively at 31 December 2020, representing year on year growth of 143.9% and 166.6% respectively.
Sezzle's net transaction margin (NTM) was US$12.4 million in 2020, representing 1.4% of UMS. This was an increase from US$0.6 million in 2019 (which was 0.2% of UMS). The buy now, pay later company said that the improvements in the margin were due to the company's improving consumer profile, which experienced favourable trends in repeat usage, frequency of purchases and overall payment performance.
What's the latest?
Sezzle is looking forward to more growth in 2021 with active consumers reaching 2.4 million (up 5.7% month on month), active merchants growing to 29,200 (9.5% growth month on month) and UMS of US$117.8 million, representing a record month and 65.1% above the average monthly pace for 2020.
To support the next stage of growth, Sezzle has secured a new US$250 million receivables funding facility with Goldman Sachs Bank USA and Bastion Funding IV LLC to support the expansion of the business in the US and Canada. This 28-month facility expands the funding capacity, while lowering the cost of borrowing and extending the maturity further into 2023.
The company expects the UMS to achieve an annualised run rate to reach more than US$2.5 billion by the end of 2021.
Is the Sezzle share price going to sizzle?
According to the broker Ord Minnett, there's a lot of potential growth for Sezzle shares over the next year with a price target of $11.50. That suggests a potential return of 40% if the prediction were to become true.
The broker was impressed by the fact that Sezzle overachieved in 2020 compared to the forecast numbers.
Sezzle's market opportunity is large in the North American market, which is where Sezzle is predominately based.
Ord Minnett doesn't think that Sezzle is going to make a profit in the next couple of years, but it is expecting revenue to continue to accelerate higher.
