Sezzle stock crashes after director's exit, but a bullish pattern is forming

Sezzle stock has remained inside a narrow range since August last year when it plunged after releasing its weak results. It was trading at $60.68 on Friday, down by 67% from its highest point last year. 

It dropped by over 12% on Friday after a board member resigned, citing differences with management.

Still, it has formed an island reversal pattern, pointing to a rebound, as its growth continues.

Sezzle’s growth momentum is continuing amid BNPL demand 

Sezzle is a smaller competitor to top companies like Affirm, Klarna, and AfterPay. It makes it easier for clients to buy and pay in four equal installments without paying any interest.

The company offers several payment options, including Pay-in-4, Pay-in-2, Pay-in-5, Pay-in-Full, and Long-Term. Most of its services charge no interest, while the long-term option charges higher interest.

Sezzle's business is doing well and the management has put in place strategies to accelerate this growth.  The most recent results showed that its revenue jumped by 32.2% in the fourth quarter to $129 million, while its net income jumped by 68% to $42 million.

This revenue growth was largely comparable to Affirm and Klarna, which grew by 38% and 33%, respectively. This surge is being driven by the demand from customers as inflation remains elevated, the unemployment rate rises, and wage growth remains muted. It has also become simple to use these BNPL solutions. 

Sezzle's growth happened as the number of active customers and shopping frequency continued growing. Its active customers grew to over 3.04 million, up from 2.7 million in the first quarter, while the quarterly purchase frequency rose to 6.6x from 6.1x.

Most importantly, analysts are optimistic that Sezzle's growth will continue in the next few years as its brand popularity rises. The average estimate among analysts is that the company’s revenue will grow by 27% this year to $575 million followed by $717 million in the coming year.

The management is working on launching other services, including deposit accounts, receipt scanning and rewards, agentic commerce, enhanced long-term lending, and Sezzle Mobile.

Still, the two biggest risks facing the company are the management issues now that a senior board member has resigned a few weeks after it replaced its auditor and appointed PwC. 

The other main risk is the rising default rate, with recent data showing that credit card delinquency rate has jumped to its highest point in years.

Sezzle stock price technical analysis 

SEZL stock chart | Source: TradingView 

The daily timeframe chart shows that the Sezzle stock price dropped from a high of $185 in July last year to $60 today. 

A closer look shows that it has never recovered since it published its numbers in August last year.

It has formed an island reversal pattern, which happens when an asset consolidates after forming a big gap.

The stock has also formed an inverted head-and-shoulders pattern, a common bullish reversal sign in technical analysis. 

Therefore, there is a possibility that the stock will rebound in the coming weeks, possibly after it releases its financial results on May 6 this year.