Klarna stock continues to decline as this analyst downgrades stock

Shares of Klarna Group plc KLAR continued their decline on Monday after falling 31% last week, marking their worst weekly decline since the buy now, pay later company debuted on public markets last year.

The selloff came despite Klarna reporting second-quarter results that exceeded Wall Street expectations.

Investors instead focused on the company’s reduced full-year outlook and signs of weaker international growth, particularly in Germany.

UBS downgrades Klarna on growth concerns

UBS analyst Timothy Chiodo downgraded Klarna to Neutral from Buy and lowered his price target to $16 from $23. The revised target still represented more than 11% upside.

Chiodo said Klarna continues to have several positives, including a new distribution partnership with Apple, its expanding card program and the potential growth of its Fair Financing offering in the US.

However, UBS was concerned about the size of Klarna’s reduction to its second-half gross merchandise volume (GMV) outlook. The brokerage said the revised forecast pointed to a “meaningful downtick in international growth expectations,” particularly in Germany.

UBS also flagged upcoming management changes. Klarna’s long-time chief financial officer and chief marketing officer are set to leave over the coming quarters, adding another source of uncertainty for investors.

Keefe Bruyette also lowered its price target on Klarna, cutting it to $21 from $26 while maintaining an Outperform rating.

Klarna cuts 2026 GMV guidance

Klarna reported second-quarter revenue of $1.04 billion, up 27% and above Wall Street expectations. Earnings came in at $0.01 per share, also beating estimates.

Despite the stronger-than-expected quarter, the company reduced its full-year 2026 GMV guidance to between $149 billion and $151 billion from its previous forecast of more than $155 billion.

Klarna attributed about $600 million of the reduction to currency movements, which affected volumes across Europe, the UK and other markets.

The company also adopted a more cautious view of European volumes during the second half of the year, with weakness particularly pronounced in Germany, its largest market by volume.

UBS estimated that, at the high end of the new range, the reduction represented roughly $3.4 billion of GMV excluding foreign exchange, or about $6 billion on an annualized basis.

Fair financing shift adds another concern

Chiodo also highlighted Klarna’s decision to shift more of its Fair Financing business toward a forward-flow model.

Under this approach, more loans are sold to investors. UBS said this would reduce transaction-margin dollar take rates compared with recognizing interest income over the full life of the loans.

Chiodo said the change “somewhat reduces one competitive advantage that Klarna holds from structurally lower funding costs.” He also noted that the strategy could put greater pressure on the company to maintain credit-quality discipline.

At the same time, he acknowledged a benefit from the more capital-light approach, saying it “should also lead to a stronger return on deployed capital.”

For investors, the combination of lower GMV guidance, weaker international growth expectations and upcoming management changes has overshadowed Klarna’s better-than-expected second-quarter results.