Key Takeaways
- The dramatic multi-bagger returns of Sezzle and Dave in 2024 were not accidents, but the result of the market repricing assets where a clear pivot to profitability was underappreciated.
- Sezzle’s inflection point was driven by its achievement of full-year GAAP profitability in 2023 and substantial net income in early 2024, a fundamental shift from its previous cash-burn model.
- Valuation disconnects often occur when a sector falls out of favour (like BNPL in 2022-2023), allowing operational turnarounds to go unnoticed until formally reported in earnings.
- Whilst the initial asymmetry has now diminished, the episode highlights a repeatable framework: identify companies with entrenched negative sentiment that are demonstrating tangible, data-led progress towards sustainable profitability.
The recent, and quite startling, performance of financial technology stocks such as Sezzle (SEZL) and Dave (DAVE) offers a compelling case study in market dynamics. Observing assets deliver four- and six-fold returns in a matter of months naturally invites scepticism, yet as the thinking popularised by the analyst ‘Next100Baggers’ suggests, such movements are rarely pure luck. They are often the violent repricing of assets where a significant disconnect between public perception and operational reality exists, catalysed by an obvious inflection point. These situations are not about swinging at every pitch, but about identifying when a business’s fundamentals have materially improved long before the market consensus has caught up.
The core of this dynamic lies in understanding why an asset becomes mispriced in the first place. For both Sezzle and the broader Buy Now, Pay Later (BNPL) sector, the narrative had soured considerably through 2022 and 2023. A consensus formed around the view that BNPL was a commoditised, low-margin business with no clear path to profitability, heavily reliant on a low-interest-rate environment that had evaporated. This narrative, whilst partially true during the sector’s growth-at-all-costs phase, created a fertile ground for mispricing when one of its constituents began to defy the trend.
The Anatomy of an Inflection Point
The market’s perception of Sezzle was anchored to its past. The company, like many of its peers, had prioritised user and merchant acquisition, leading to significant cash burn. However, beneath the surface, a strategic pivot towards profitability was well underway. The catalyst was not a sudden event, but the culmination of disciplined operational changes that became undeniable with the release of its financial results. The company’s announcement on 7 March 2024 that it had achieved its first full year of GAAP net income in 2023, followed by a robust $16.2 million in GAAP net income for the first quarter of 2024, was the inflection point made manifest. [1][2]
This was not merely an accounting adjustment; it was a fundamental shift in the business model, evidenced by improving unit economics and positive free cash flow. The market, which had been pricing Sezzle for terminal unprofitability, was forced to rapidly reassess its entire valuation framework.
Sezzle Financial Turnaround (USD Millions)
| Metric | FY 2022 | FY 2023 | Q1 2024 |
|---|---|---|---|
| Total Revenue | $125.7 | $159.5 | $50.4 |
| GAAP Net Income | ($74.9) | $7.1 | $16.2 |
| Adjusted EBITDA | ($41.7) | $26.1 | $20.4 |
Similarly, Dave, which operates a cash advance model rather than traditional point-of-sale BNPL, benefited from a macro environment that was perceived as a headwind for the wider fintech space. Higher interest rates and tighter credit conditions from traditional lenders drove more consumers towards its platform. The company demonstrated consistent Adjusted EBITDA profitability and a narrowing GAAP net loss, showing progress that was overlooked by a market focused on broader sector weakness. [3]
The New Landscape: Assessing Sustainability
Following such explosive moves, the investment thesis must necessarily evolve. The deep value opportunity has passed, replaced by a more conventional growth narrative. The question shifts from “Is it mispriced?” to “Can it sustain this trajectory?” Sezzle’s valuation, having expanded dramatically, now prices in a significant amount of future growth and sustained profitability. The risks have not disappeared; they have simply changed shape.
Competition from established payment giants and heavily funded private firms like Klarna remains intense. Furthermore, the entire BNPL sector operates under the shadow of potential regulatory changes, particularly from bodies like the U.S. Consumer Financial Protection Bureau (CFPB), which could impose stricter oversight and potentially compress margins. [4] The asymmetric risk-reward profile that existed at the start of the year has flattened considerably. Investors must now underwrite a story of execution rather than one of simple repricing.
Implications for Sourcing Future Opportunities
The lesson from Sezzle and Dave is not to chase momentum in fintech, but to refine the process for identifying where the next market misfire might occur. The setup appears most promising in sectors that have experienced a broad, narrative-driven sell-off, creating a low-conviction environment where company-specific progress is ignored. The key is to look for tangible evidence of operational turnarounds that contradict the prevailing consensus.
This involves scrutinising financial statements for improvements in unit economics, cash flow generation, and a clear, management-led shift from a growth-at-any-cost mentality to one of sustainable profitability. Often, these green shoots are visible one or two quarters before they become headline news.
As a concluding hypothesis, the next wave of such opportunities may not come from the well-trodden ground of consumer-facing fintech. Instead, it might be found in the less glamorous, B2B-focused financial infrastructure space. These are the ‘plumbing’ companies whose business models are more opaque to the average investor. A turnaround in one of these firms, which is harder to spot and less susceptible to retail sentiment, could create a similar dynamic: a slow build of fundamental improvement followed by a rapid, catalyst-driven repricing once the evidence becomes too compelling for the market to ignore.
References
[1] Sezzle Inc. (2024, March 7). Sezzle Announces Fourth Quarter and Full-Year 2023 Financial Results. Sezzle Investor Relations. Retrieved from https://investors.sezzle.com/news-releases/news-release-details/sezzle-announces-fourth-quarter-and-full-year-2023-financial
[2] Sezzle Inc. (2024, May 9). Sezzle Announces First Quarter 2024 Financial Results. Sezzle Investor Relations. Retrieved from https://investors.sezzle.com/news-releases/news-release-details/sezzle-announces-first-quarter-2024-financial-results
[3] Dave Inc. (2024, May 9). Dave Reports First Quarter 2024 Results. Dave Investor Relations. Retrieved from https://investors.dave.com/news/news-details/2024/Dave-Reports-First-Quarter-2024-Results/default.aspx
[4] Consumer Financial Protection Bureau. (2023, May 22). CFPB Report Finds Buy Now, Pay Later Borrowers Are Younger, Less Affluent, and More Likely to Hold Other Debt Products. Retrieved from https://www.consumerfinance.gov/about-us/newsroom/cfpb-report-finds-buy-now-pay-later-borrowers-are-younger-less-affluent-and-more-likely-to-hold-other-debt-products/
Next100Baggers. (2025, August 1). [Almost too clean: 4-baggers & 6-baggers in less than 3 months. $SEZL & $DAVE weren’t “lucky.”]. Retrieved from https://x.com/Next100Baggers/status/1942203232534553000
