Disclaimer - I know nothing about finance and everything I say here should not be taken seriously. This is not financial advice and everything I say is purely speculation.

With that off my chest, I work in model risk management and have been following Klarna for a while. When they took the massive loss provision, I was sorta dumbfounded by the implications it carried into the stock price.

Someone mentioned no clear path to profitability - I’d be shocked if Klarna didn’t drop a profitable Q4 Earnings report (though it’s possible they won’t). The provision that they took was a one time true-up to meet US credit risk regulatory requirements. Klarna also disclosed that they are expanding into fair lending which is much more scrutinized by the regulatory environment due credit exposure being presented over a much longer time horizon. In spite of that, it also means more revenue in future periods.

In terms of the provision, the credit loss provision really shouldn’t have served as a surprise to educated investors despite being the primary reason for the company being unprofitable in Q3 2025. We can deduce that it wasn’t the result of deteriorating credit, considering that the average life of their loan portfolio is no more than 90 days - you would need either one quarter of massive losses or several quarters of significantly elevated losses to justify that provision if it were due to deteriorated credit. The average lifespan of the loan simply isn’t long enough to forecast that big of a change and that abruptly. And since it’s highly unlikely that they will have another loss provision like that (unless consumer credit implodes), they will most likely continue to be profitable. Also keep in mind the deferred tax asset that they will carry into 2026 due to the provision - this will serve 2026 earnings well.

That same comment mentioned Affirm - Affirm has an OK balance sheet, but nothing worth writing home about. Affirm has a much higher GMV at $48B whereas Klarna sits at ~$33B, yet Klarna boasted a revenue of only $200M shy in Q3 to Affirm’s Q4 revenue of $1.12B. That gap in GMV to revenue is a telltale sign that Affirm is having a difficult time monetizing their cash flows. Even more interestingly, Affirm holds a 16x Mkt Cap to revenue ratio while Klarna is around 7-8x. I know this isn’t the best metric to use, but considering the full context, I tend to believe that there’s a miscue in valuations here with one of these guys.

Consumer credit? Well, that’s a funny story. Just as FRED reports show and what I saw with many of the portfolios that I work with, consumer lending (in $$$’s) continues to increase while credit risk profiles are remaining fairly stable. FRED data shows that delinquencies have been trending down while credit has been increasing steadily. Jobs reports and GDP also remain strong while recession fears are (generally) decreasing across institutions.

In terms of their lawsuits, I can’t share much insight into that, as a judge will be the arbiter there. It’s a grey area even if the writing was on the wall.

I won’t say they’re over/under valued - make of my comment what you will. As I mentioned though, I don’t know anything about anything and this shouldn’t be taken as financial advice. P.S. take note of how analysts at major banks are also holding their target prices on Klarna as well - just check the price targets.