Goldman Sachs: Klarna Shows Transaction Margin Improvement, Maintains Buy Rating

Overview

Goldman Sachs hosted a fireside chat with Klarna CFO Niclas Neglen, reviewing quarterly performance and addressing investor queries. The overall message was positive, with the company reiterating its full-year priority of achieving dollar transaction margin growth, emphasizing profit growth rather than loosening credit standards. The firm views quarterly developments as positive signals, with potential catalysts for stock outperformance including U.S. transaction margin improvement or sustained ROW growth.

Core views

Strong business growth momentum: As a geographically diversified BNPL provider, Klarna saw 31% GMV growth acceleration outside the U.S. in 1Q26. Beyond core markets, rapid growth was observed in Italy, France, Spain, and other markets. The card business has 5.4 million users across 16 markets, with card users showing three times the frequency and four times the revenue of non-card users after six months. Improved credit quality: 1Q26 credit results improved, with provisions as a percentage of GMV sequentially declining. The 30+ day delinquency rate dropped from 3.5% in 4Q to 3.4% in 1Q26. Management believes the short-term nature of receivables allows quick adjustments to credit quality and expresses confidence in the full-year credit loss trajectory. Enhanced profitability: The company completed a significant risk transfer (SRT), reducing risk-weighted assets and credit exposure. Transaction margin as a percentage of revenue is expected to approach mature market levels (up to 60% in some regions). AI initiatives and efficiency improvements will also provide leverage. Valuation and rating: Maintain Buy rating with a 12-month target price of $21, based on a 9x multiple of Q5-Q8 EBIT-SBC estimates. Current share price is $15.17, implying ~38.4% upside.

Analysis framework

The firm obtained firsthand information through management meetings and validated the company's growth rationale using quarterly financial data (GMV, revenue, transaction margin, credit loss rates). Analysis focused on visibility of transaction margin expansion, credit quality trends (projected via delinquency rate curves), and diversified funding strategies (stable deposit base matching short-term receivables). Valuation employed an earnings multiple approach, referencing future EBIT-SBC estimates.

Methodology notes

• Valuation MethodPE/PEG valuation

  Earnings Multiple Valuation

  The report uses a 9x EBIT-SBC multiple to derive the target price, a typical relative valuation method based on profitability, helping investors understand the market's pricing of the company's future earnings potential.

• Fixed Income & Credit AnalysisSpreads & Asset Quality

  Delinquency Rates as Leading Asset Quality Indicators

  The report projects full-year credit loss trajectories using 30+ and 60+ delinquency rate curves, common leading indicators in credit analysis for assessing portfolio health.

• Corporate Fundamentals & Financial FrameworkEarnings Quality Analysis

  Core Performance Metrics Analysis

  The company views dollar transaction margin growth as the clearest measure of business performance, reflecting a focus on profit quality rather than mere scale growth—a key factor in evaluating fintech sustainability.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Klarna Group Plc. (KLAR)

  Coverage Target

  Strengths

  Geographic diversification, stable funding base, high ARPU from card users

  Weaknesses

  Complexity of U.S. financing expansion, credit concerns

  Risks

  Weak macro environment, increased competition

Key data

• 1Q26 Non-U.S. GMV Growth31%Quarterly acceleration
• 30+ Day Delinquency Rate3.4%Improved from 3.5% in 4Q
• 2Q26 GMV Guidance$35.5-36.5 billionCompany guidance
• 2Q26 Dollar Transaction Margin Guidance$375-395 millionCompany guidance
• Full-Year Adjusted Operating Margin Guidance>6.9%Company guidance
• Target Price$2112-month target

Impact & implications

Quarterly developments are seen as positive signals, with potential catalysts for stock outperformance including U.S. transaction margin improvement or sustained ROW growth. The company's stable funding base (fixed deposits with a 270-day weighted average maturity matching 49-day consumer receivables) lays a foundation for long-term growth.

Risks

• Weak macro environment
• Increased competition
• Inadequate credit underwriting
• Unfavorable regulations

What to watch

• Continued U.S. transaction margin improvement
• ROW growth momentum
• Credit loss trajectory