TipRanks Smart Growth Portfolio #33: Where Credit Is Due
Dear Investors,
Welcome to the 33rd edition of the Smart Growth Portfolio and Newsletter.
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Portfolio News
❖ Enova International (ENVA) will be the next Smart Growth Portfolio company to report its quarterly results, with the third-quarter release scheduled for October 23. The fintech company delivered strong financial and business results back in Q2, with revenue and adjusted EPS up 22% and 46% year-over-year, respectively. Management forecasted 15%+ and 20-25% revenue and adjusted earnings growth in Q3, with full-year revenue expected to grow around 20% and adjusted EPS growth projected at approximately 30%.
Meanwhile, the previously announced leadership transition at Enova is progressing, with the succession plan effective January 1, 2026. Current CEO David Fisher will become Executive Chairman while CFO Steve Cunningham assumes the chief executive role. Scott Cornelius, currently Treasurer, will succeed Cunningham as CFO. This succession plan reflects Enova’s long-term strategic leadership planning aimed at maintaining operational momentum and stability.
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❖ Micron (MU) continues to see strong analyst support. BNP Paribas Exane raised the company’s rating from “Sell” to “Buy” in a rare double upgrade move, while also lifting its price target from $100 to a Street-high of $270. BNP’s U-turn from bear to bull on Micron is driven by the recognition of HBM as a new, sustainable growth driver – with the broad memory market undergoing a structural shift as AI creates long-term momentum for faster, more efficient chips. Analysts believe that MU’s technological advances in HBM drive competitive advantages, which are expected to boost profitability over the coming years. BNP says that Micron is entering the early phase of a “memory supercycle,” with steady growth in memory demand driven by AI infrastructure and data center expansion. On Thursday, MU received another leg up, with UBS and Citi raising their price targets. Citi analysts went as far as saying that they believe DRAM to become “the next type of chip to secure long-term contracts with the AI food chain, given its importance and projected undersupply.”
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❖ MKS Inc. (MKSI) is reportedly in advanced negotiations with private equity firms and strategic buyers to sell its specialty chemicals division for about $1 billion. The potential divestiture is part of MKS’s strategic shift to focus its resources and operations on its core semiconductor equipment business, particularly serving chip manufacturers like TSMC. The deal is expected to enhance MKS’s financial flexibility and support its high-margin areas aligned with AI and memory chip demand.
Meanwhile, the company is also seeing strong analyst support, with Bank of America, Needham, Morgan Stanley, and Mizuho all raising their price targets while maintaining “Buy” ratings. Analysts cited an increasingly optimistic outlook, driven by momentum in advanced chip manufacturing and MKS’s unique tools and chemical solutions. The firm’s strong position in AI and HPC markets is a key short-term growth driver despite risks from leverage and cyclical NAND demand.
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❖ Innodata (INOD) received two major price-target increases over the past few days. Wedbush raised its price target to $90 from $75, and BWS Financial increased its target to $110 from $74, with both firms maintaining their “Buy” ratings on the stock. Analysts cited INOD’s increasingly stronger competitive positioning in the data labeling industry, along with confidence in its growth trajectory, which is supported by expanding enterprise AI adoption and customer diversification beyond traditional tech firms.
After Innodata’s blowout Q2 results, analysts expect its Q3 report on October 30 to reflect the continued robust demand for the company’s generative AI and Agentic AI services, along with new and expanding customer contracts driving growth in the second half of 2025. While this quarter’s results are expected to be somewhat softer due to tough comps and typical business seasonality, full-year 2025 revenue is projected to expand 42-43% from last year – a notable achievement given that 2024’s revenue almost doubled from 2023 – while its adjusted EPS is slated to come in at about $1.29, representing year-over-year growth of over 33%.
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Under Review
❖ We are placing Monday.com (MNDY) under review following a strong decline over the past three months and persistent weakness across the software sector, despite strong fundamentals and analyst support.
The stock has dropped roughly 23% year-to-date, reflecting investor rotation out of SaaS names rather than any deterioration in company performance.
MNDY’s Q2 results were solid, with revenue and non-GAAP EPS surging past analyst estimates, while enterprise customer additions remained robust. Guidance for Q3 and full-year 2025 points to ~26% annual growth with a 13% operating margin and 26-27% FCF margin. Yet the stock sold off sharply after management’s cautious tone on growth and margin trajectory, with R&D spending rising and GAAP operating profit slipping into negative territory.
The market reaction reflects broader fears that “AI is eating software,” compressing multiples for even high-quality SaaS firms. Monday.com’s high forward P/E (~47) leaves little margin for error, and investors remain sensitive to any hint of slowing ARR or margin compression. While the company’s new AI tools – Monday Magic, Agents, and expanded automations – could meaningfully boost enterprise adoption, monetization is not yet visible in forecasts.
Analysts remain overwhelmingly bullish, with consensus price targets averaging $276 (50%+ upside) and revenue growth expectations of 22-30% through 2028. Institutions like JPMorgan have doubled their stakes this year, signaling confidence in the long-term story. But sentiment in the software space remains fragile, and MNDY continues to trade near $182 – a level that could either prove to be a base or a breakdown zone if momentum fails to stabilize.
Bottom line: Monday.com remains a fundamentally strong, cash-rich growth company with world-class products and execution. However, given the sharp technical deterioration and continued sector pressure, we’ll keep MNDY under review until its November 10 earnings report. A confirmed recovery or improving guidance could justify retaining it in the Smart Growth Portfolio – but if the stock fails to regain traction, we’ll likely exit rather than try to “catch a falling knife.”
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❖ We are keeping Clear Secure (YOU) under review following its underperformance over the past three weeks, despite the recent rebound.
The stock is down about 17% from its recent peak on September 22 despite several positive news items and announcements. YOU expanded CLEAR+ enrollment to travelers from 40 additional countries across Europe, Asia, and the Americas, enabling international visitors to expedite security screening at U.S. airports through the company’s network of over 150 lanes operating at 60 airports nationwide. Additionally, Clear announced an eGate pilot program designed to provide scalable security solutions ahead of the World Cup and America’s 250th anniversary celebrations.
Earlier, the company revealed a new identity verification solution developed in partnership with DocuSign. This solution leverages Clear’s B2B secure identity platform, CLEAR1, and its biometric verification technology to make it easier and more secure for people to verify their identity directly within the DocuSign agreement experience. The partnership aims to address the challenge of maintaining security amid the growing threat of identity fraud, driven by generative AI’s rising abilities.
Clear Secure’s broad push into finance, real estate, healthcare, and automotive verticals showcases its ability to leverage biometric identity solutions across diverse industries, unlocking new revenue opportunities. Together with extensive partnerships – recent examples include Fidelity National Financial, Nordic, Hackensack Meridian Health, and Snappt – these solutions strengthen its long-term potential. However, investors need to see at least some of these positive developments reflected in YOU’s bookings growth when it reports Q3 results on November 17.
The recent stock weakness may be driven in part by profit-taking after a ~55% rally from mid-July to mid-September, and was also likely exacerbated by worries about the government shutdown impacting Clear’s existing operations and delaying new contracts and regulatory approvals. If these concerns are quickly dispelled, this could lead to a relief rally – potentially even producing a short squeeze. YOU’s short interest is high at about 21% of its float – one of the highest in the software sector – reflecting entrenched negative investor sentiment.
While the company’s fundamentals remain intact and its expansion into various verticals is expected to continue driving growth, investors – along with some analysts like Wells Fargo – are questioning its government-dependent business model at a time when the Trump administration continues to send conflicting signals regarding federal spending plans.
Wells Fargo recently maintained a “Sell” with a price target implying a ~20% downside, citing concerns about the company’s business challenges, competitive risks, and financial outlook. In contrast, D.A. Davidson initiated coverage with a “Buy” rating and a Street-high PT of $45, which signals an upside of nearly 44%, citing optimism about Clear Secure’s growth potential, expanding partnerships, and the increasing adoption of its biometric identity solutions.
With analyst opinion mixed and the stock firmly in oversold territory, we will be keeping YOU under a magnifying glass for a while.
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This Week’s Top Growth Pick: Sezzle (SEZL)
Sezzle Inc. is a purpose-driven digital payments company redefining how consumers access and build credit. Its platform lets shoppers choose from multiple short- and long-term installment options while helping merchants lift conversion and loyalty. Beyond core BNPL, Sezzle offers credit-reporting tools, subscription plans, and flexible payment tiers that turn convenience into lasting engagement. Focused on consumers often underserved by traditional lenders – such as younger spenders and below-prime borrowers – the company pairs disciplined underwriting with a lean capital model that’s kept it profitable for three straight years. In a market crowded by volume chasers, Sezzle’s edge lies in scaling responsibly – growing fast without sacrificing transparency, trust, or control.
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Grow Now, Pay Later
Founded in 2016 in Minneapolis, Sezzle began as a consumer-focused fintech designed to make everyday purchases more affordable through short-term, interest-free installment payments. The company’s early years were defined by experimentation – launching debit-based pay-later options before pivoting decisively toward credit-linked installments. That shift proved pivotal, aligning Sezzle with the surging “Buy Now, Pay Later” (BNPL) trend while establishing its reputation for transparent, responsible lending.
Sezzle’s public listing on the Australian Securities Exchange (ASX) in 2019 provided the capital to accelerate merchant acquisition and North American expansion. At the time, Australia was the global hub for BNPL investing – home to Afterpay and Zip – giving Sezzle access to investors who already understood and valued its business model. In 2023, Sezzle voluntarily delisted from the ASX and consolidated its listing on the Nasdaq, aligning its investor base with its U.S.-centric operations and deeper domestic liquidity. By then, BNPL had gained broader recognition among U.S. investors, and Sezzle no longer required a foreign exchange to support its growth trajectory.
The company’s merchant network and transaction volume expanded rapidly during the pandemic, supported by e-commerce growth and rising consumer adoption. By 2021, SEZL had introduced Sezzle Up, a credit-reporting feature that allowed users to build credit histories through positive repayment behavior. This was a first among major BNPL providers, and proved to be a key differentiator bridging short-term convenience with long-term financial inclusion.
The past several years have been the most transformative. Sezzle refocused on profitability, exited non-core markets, consolidated funding under a single credit facility, and enhanced underwriting through machine-learning-based behavioral scoring. In 2022, it formalized its status as a Public Benefit Corporation, embedding its mission to “financially empower the next generation” into its governance – a move that reinforced accountability to both shareholders and society, aligning its profit model with long-term consumer trust. That same year, Sezzle achieved sustainable profitability, a rare feat in the BNPL space, and has remained profitable each quarter since.
Between 2023 and 2025, Sezzle evolved into a full-scale digital payments ecosystem by launching multiple subscription tiers, introducing recurring-payment products, and establishing a long-term lending framework that extends credit flexibility beyond SEZL’s core pay-in-installment models. A nationwide partnership with WebBank, fully operational since early 2025, now facilitates co-branded, regulated loan products, centralizing compliance and underwriting under a single banking partner, giving consumers more flexibility and Sezzle more monetization channels.
The company has reinforced this foundation through shareholder-focused actions and a deepening investment in its technology core. Over the past year, SEZL has expanded its use of AI-driven risk analytics, leveraging behavioral and transaction-level data to refine credit decisions in real time and maintain low default rates while scaling faster. Its growing data infrastructure underpins this capability – integrating merchant, consumer, and repayment insights into a unified intelligence layer that supports personalized credit offers, adaptive underwriting, and dynamic fraud detection. Together with ongoing capital discipline and strong governance, these initiatives strengthen Sezzle’s ability to grow profitably and sustainably in an increasingly competitive digital-credit landscape.
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Source: Sezzle, Inc. Q2 2025 Investor Presentation
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Split n’Scale
Sezzle operates a payments platform that lets shoppers spread out purchases via installments – but it has evolved far beyond “pay-in-four” into a modular, tech-rich financial ecosystem. The heart of its model is merchant fees and transaction spreads, but it layers on recurring revenue via subscription services, On-Demand financing, and other tools. These extensions make the business more SaaS-like as each user is nudged toward higher lifetime value, lower churn, and cross-selling opportunities.
SEZL’s evolution rests on data. Sezzle’s machine-learning models read behavioral patterns in real time – from repayment timing to purchase rhythm – to fine-tune credit decisions with unusual precision. The result is growth without the usual BNPL blow-ups: charge-offs remain contained below 3% – a sweet spot for BNPL providers – even as volume and engagement surge, with risk controls scaling alongside deal volumes. It’s one of the few BNPL players to reach sustained profitability by focusing on low overhead, data-driven margins, and precise customer acquisition.
Sezzle’s product suite has expanded well beyond payments. Express Checkout reduces cart abandonment by compressing transaction time, Wishlist and price-drop alerts drive repeat engagement, and mobile-wallet integrations enable instant purchase options at checkout. Sezzle Balance acts as a lightweight digital wallet – giving users flexibility to manage payments or fund future purchases within the same ecosystem. Meanwhile, Sezzle Up embeds credit-reporting functionality, allowing users to build credit history – a feature few peers provide.
What sets these products apart is not just convenience but coherence: they create a feedback loop of data, engagement, and credit insight that continually refines the platform’s predictive accuracy. These elements differentiate Sezzle in a crowded space by giving users control, transparency, and flexibility – features most competitors don’t fully offer – with subscriber engagement driving scale. For SEZL, these layers help shift the model from one-off transactions to a holistic user ecosystem.
While the company remains exposed to macro and consumer risks, its digital-only structure insulates it from physical supply-chain volatility – a buffer many retail-dependent companies lack. The total addressable market is vast: global BNPL projections span hundreds of billions to over a trillion dollars by 2030, with Mordor Intelligence forecasting a $640 billion BNPL services market in 2025 and growth to $1.43 trillion by 2030. Sezzle today occupies just a sliver of that (its merchant and user base remain relatively concentrated), but it has a credible runway to scale share through product depth, cross-sell, and disciplined execution.
The One Big Beautiful Bill (OBBB) fiscal package, passed in July 2025, restores full expensing for domestic R&D costs – creating a strong tailwind for fintechs like Sezzle that invest heavily in product and data infrastructure. That change enhances cash flow and lowers the effective tax drag on innovation investment.
Looking ahead, Sezzle’s growth path depends on sustaining its balance between precision and scale – expanding into new verticals such as healthcare, subscriptions, and digital content while keeping underwriting tight and operations lean. Its data infrastructure gives it flexibility to adapt as regulations, credit conditions, and consumer habits shift. In a market still defining its long-term winners, Sezzle’s disciplined model suggests endurance over hype.
Source: Sezzle, Inc. Q2 2025 Investor Presentation
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Charging Forward
Sezzle’s financial trajectory has been nothing short of transformative – from a high-growth upstart to a track record of execution that now rivals larger fintech peers. Over the past five quarters, the company has beaten analyst expectations for both revenue and earnings every time, while expanding margins and compounding triple-digit EPS growth. That explosive pace is now settling into a more durable rhythm: in Q2 2025, adjusted EPS rose 91% year-over-year – down from the prior quarter’s 348% surge – as Sezzle begins to scale from hypergrowth into maturity.
Total revenue climbed 76.4% year-over-year to $98.7 million, exceeding consensus by about 4%. The surge was powered by rising transaction volumes, broader merchant adoption, and recurring contributions from subscription and On-Demand products. Gross Merchandise Volume (GMV) grew 74.2% to $927 million, while active users rose 52% and engagement among revenue-generating users more than doubled.
Adjusted EBITDA jumped to $37.9 million, up by 106% from a year earlier, producing an EBITDA margin of 38% – among the highest in the fintech sector and a clear sign of operating efficiency. Net income margin held at 28%, and gross margin remained robust at 61%, supported by stable merchant economics and sub-3% charge-off rates. Free cash flow stayed positive, bolstered by lean operations and minimal capital intensity, while liquidity remained strong under its consolidated credit facility and low leverage. Operating income reached $36.1 million in Q2, up 116% year-over-year, with operating margin expanding by 6.8 points to 36.6%.
Sezzle’s operating leverage improved as revenue growth far outpaced cost expansion – even with investments into the business rising sharply, profitability continued to widen. Operating expenses climbed to $8.8 million from $1 million a year earlier as SEZL reinvested in marketing and technology, including AI-enhanced analytics and back-end automation to sharpen credit precision and streamline merchant integrations. Management has emphasized that customer acquisition costs should pay back within six months – an aggressive yet achievable benchmark given user retention and transaction frequency trends.
The company’s self-defined “Rule of 100” – the sum of revenue growth rate and adjusted EBITDA margin – reached 165 in Q2, underscoring a blend of scale and efficiency rarely seen in consumer fintech. Sezzle reached non-GAAP profitability in 2022 and achieved sustained GAAP profitability soon after – one of the few BNPL firms to do so – maintaining both for eight consecutive quarters.
For full-year 2025, management reaffirmed guidance for revenue growth of roughly 60-65%, adjusted EBITDA between $170-175 million, and adjusted EPS of $3.25 – reflecting year-over-year growth of over 80%. Analysts project Q3 revenue of about $105 million and EPS of $0.65 ahead of the November 7 report – a conservative view likely reflecting pre-revision models from before Sezzle’s last upside surprise. Even if growth moderates, profitability momentum and margin expansion point to another strong quarter of disciplined execution.
Source: Sezzle, Inc. Q2 2025 Investor Presentation
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Split Decision
There aren’t many pure-play BNPL stocks to benchmark Sezzle against. Beyond the point-of-sale financing leader Affirm, its closest peers include AI-driven lender Upstart, embedded-finance platform Marqeta, and global payments facilitator Payoneer – each reflecting a different facet of Sezzle’s fintech model.
Among those, Sezzle’s stock saw the largest gains this year – rising more than 74% – but also the most volatile journey. Helped by surging optimism towards anything tech and improving economic sentiment, SEZL surged by nearly 200% from May 7, when it delivered a spectacular “beat-and-raise” Q1 report, to early August’s second-quarter results. These disappointed by showing “only” double-digit revenue growth – spurring investors to take their outsized profits – while worries about household financial health began to spread, taking their toll on the broad fintech industry’s stocks.
Still, several tailwinds may add strong wind to the stock’s sails. The Federal Reserve is slated to continue reducing its key rates – and, although SEZL is well-positioned to grow in both high- and low-interest-rate environments, the easing should boost overall economic activity and discretionary spending, directly and indirectly benefiting the company’s business. Additionally, a low-interest-rate environment supports credit quality, a crucial metric for BNPL firms.
In company-specific supporting factors, Sezzle is expected to deliver its sixth straight double-beat on November 7, which could provide a strong positive catalyst after the selloff of the recent two months. Another is the fact that the selloff has driven down the company’s valuations, which now appear to be in line with the tech-stock universe averages, despite 7-8x revenue growth rates that more than justify a premium.
Moreover, SEZL trades significantly below peer averages on trailing and forward P/E (both GAAP and non-GAAP) and EV/EBITDA ratios, while its Price/Sales and EV/Sales are close to the mean. This is the case despite the fact that Sezzle has the only meaningfully positive ROE and ROA metrics among its peers, while clocking in best-in-class EBITDA and net income margins.
But the most striking in all these considerations is Sezzle’s strongly undervalued growth. The company’s forward Non-GAAP PEG of 0.10 is one of the lowest in the market overall, let alone its fintech peers. This is not just GARP (growth at a reasonable price) – this is an outright disconnect. With plenty of tailwinds in play, a meaningful beat on Q3 earnings could sharply reverse the stock’s course. Moreover, with about 20% of float sold short, this may also create a “short squeeze,” sending SEZL on another parabolic surge.
On top of that, Sezzle actively repurchases its shares. Its current $50 million buyback plan, authorized in March 2025 and active since April, replaced the earlier program completed in July 2024. Under the old plan, Sezzle repurchased roughly $4.6 million of shares last year. The company spent $23.5 million of the newly authorized program over Q2 2025, retiring over 4% of its available public float.
In March 2025, Sezzle executed a 6-for-1 stock split, expanding its share base and improving trading liquidity while maintaining total shareholder value. This action logically complements the company’s active $50 million buyback program, further broadening accessibility for retail investors.
The coming quarter will test whether Sezzle’s financial discipline can hold as growth normalizes – but few fintechs of its size combine its level of profitability, cash flexibility, and valuation upside. If execution stays consistent and macro conditions ease, SEZL could soon find itself at the center of the BNPL trade again – this time on a stronger footing.
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To Sum It All Up
Sezzle offers a growth investment case built on precision, scale, and mispricing. The company operates at the intersection of fintech and consumer empowerment – where data science, embedded finance, and real-time payments converge into a recurring-revenue model. Execution has been consistent, with five straight quarters of revenue and earnings beats, rising margins, and profitability that most peers still chase. Yet the stock trades at compressed multiples despite growth metrics that rival top SaaS names. That gap sets up a clear GARP opportunity – investors get fintech-scale growth at discounted valuations. With its technology-driven underwriting, expanding ecosystem, and proven capital discipline, Sezzle is positioned as a durable compounder in the evolving BNPL landscape – a high-efficiency growth story still priced like a risk trade.
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Smart Growth Portfolio
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Disclaimer
The information contained in this article represents the views and opinions of the writer only, and not the views or opinions of TipRanks or its affiliates and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices, or performance.
