Is the Sezzle (ASX:SZL) share price a buy?

The Sezzle share price is one to think about after a recent decline.

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Might the Sezzle Inc (ASX: SZL) share price be one to think about after the buy now, pay later company’s recent decline.

Since 8 July 2021, the Sezzle share price has actually dropped by around 16%.

There hasn’t been too much market sensitive news since its quarterly update for the three months to 31 March 2021.

One announcement has been that the buy now, pay later business has entered into a three-year agreement with the US-listed Target Corporation. In early June, it said that it had concluded its proof of concept with Target. Under the agreement, Sezzle’s product will be used in-store and across Target’s digital platforms, providing access to interest-free payment plans for purchases made at Target.

Another announcement was that Discover Financial Services is going to invest US$30 million into Sezzle, based on a share price of $8.83. The two parties have also proposed to enter into an expanded partnership, including plans for a buy now, pay later network solution on the Discover Global Network, as well as a dedicated referral program introducing Discover credit and debit products to Sezzle’s consumer base.

Investors particularly like to pay attention to the quarterly update from the buy now, pay later business.

Latest quarterly update

When the company first announced its performance for the three months to 31 March 2021, the Sezzle share price went up 8.4% to $9.63 on the day. But it has actually fallen by 16% from then.

Sezzle revealed that in the first quarter of its 2021, it reached new highs for underlying merchant sales (UMS), active consumers, active merchants and repeat usage.

UMS for the first quarter increased 214.1% year on year to US$375.1 million (or $492.5 million in Australian dollar terms). This represented 16.9% quarter on quarter growth. The March UMS beat December’s UMS by 30%.

The buy now, pay later business also said that its income as a percentage of UMS remained steady year on year at 5.9%.

Another 400,000 active consumers were added during the quarter, bringing the total to more than 2.6 million active consumers (up 126.6% year on year).

Over 7,300 active merchants were also added in the quarter, the largest quarterly increase in the company’s history. There were over 34,000 active merchants on the Sezzle platform at the time of the update.

Management said that the consumer profile continues to improve as active consumer repeat usage grew to 90.7% (which was the 27th consecutive month of improvement).

It also saw a positive shift of more than 10 percentage points year on year towards automated clearing house (ACH) as a payment method. This comes with lower costs.

Is it time to look at the Sezzle share price after the decline?

The broker Ord Minnett currently rates Sezzle shares as a buy. The price target is $11.90, which suggests the Sezzle share price could increase by a large 45% over the next 12 months if the broker is right.

Ord Minnett has pointed out that the deal with Target could lead to a significant increase to UMS in future years and proves its alternative offering can win over major merchants.

Should you invest $1,000 in Sezzle right now?

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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