Payments, Processors & IT Services: June 2026 BNPL survey

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Payments, Processors & IT Services: June 2026 BNPL survey

Downside risks to our price objective are 1) increased competition from a wider group of

companies as XYZ moves upmarket and international, and intensifying competition in

Cash App, 2) overall macro conditions for small/medium-sized businesses, and 3) lack of

diversification for Cash App revenue/gross profit streams.

Klarna Group PLC (KLAR)

Our $23 Price Objective is based on an 4x STM EV/GP multiple. An 4x EV/GP multiple is

a premium to global BNPL providers but below that of its closest comp. Relative to its

closest comp, Klarna has a larger network and faster GP growth, but weaker near-term

monetization and profitability.

Downside risks to our PO: heightened competitive intensity in the BNPL market and the

loss of a major retail partner. Sensitivity to macro and consumer spending / credit trends

is also a key risk. We believe Klarna is likely particularly sensitive to how middle and

lower income consumer finances fare. Klarna also relies on deposit and third party

funding to fund customer purchases and any disruption to this funding is a key risk.

BNPL is a relatively nascent industry and has periodically attracted regulatory scrutiny

which is also a risk.

PayPal Holdings Inc (PYPL)

Our $53 PO is based on 9x 2027E EPS. A 9x PE multiple is broadly consistent with other

legacy payment and processor comps. Our multiple reflects our view that PYPL's scale

and strong position in eCommerce is balanced by market share loss in its core branded

checkout business.

Downside risks to our price objective are 1) macro: PYPL's business skews towards

lower- to middle-income consumers' spending on more discretionary purchases, 2)

execution: on the ongoing strategic initiatives to improve transaction profit/unbranded