Why the Sezzle share price rose as much as 10.63% on Wednesday

The Sezzle share price rose on Wednesday, 23 September, after the buy now pay later (BNPL) company revealed that it was partnering with Ally Lending, the lending arm of the US-based bank, Ally Financial.

In response to this news, investors bid the stock to an intraday high of $7.180 per share – implying a move of 10.63% from yesterday’s closing price. This price action was likely buoyed by general market optimism – with the ASX 200 benchmark trading in the green throughout Wednesday’s session.

Mind you, optimism waned somewhat by the afternoon session – with the stock drifting lower throughout the day – last trading around the $6.70 mark.

Details of the partnership

Under the partnership with Ally Lending, Sezzle is set to offer longer-term instalment payment solutions to both its customers and merchants – in a deal that will see the company not take on any additional balance sheet risk.

Looking at the specifics of Ally Lending’s current installments product, it was noted that the financial services firm:

‘Enables monthly fixed-rate installment-loan products that extend up to 60 months in length and US$40K per instalment plan.'

RBC analysts noted that this partnership would likely result in a co-branded product offering.

Sezzle has made a name for itself by offering short-term, interest free financing options to its user-base. Looking forward, Charlie Youakim, Sezzle’s Chief Executive Officer said:

'Our collaboration with Ally Lending enhances our customer financing offerings, making it possible for consumers to better manage their finances.'

Mr Youakim went on to highlight the cultural fit between Sezzle and Ally Lending, saying 'Ally's dedication to its customers and commitment to innovation aligns with our own vision and culture – making this a good fit for us.'

Sezzle share price: RBC analysts eye upside

Analysts from the Royal Bank of Canada (RBC) – who have been bullish on Sezzle’s prospects for some time now, argued that the partnership should prove to be mutually beneficial for both Sezzle and Ally Lending, saying:

‘SZL can reach a broader range of merchants and ticket size with no requirement for balance sheet funding, cost or additional credit risk, leading to incremental gross profit.’

While the investment bank noted that the details around a possible revenue model remain vague, it was argued that: ‘the economics of the deal appear attractive, particularly for sales through SMB merchant partners given the higher merchant fee margin than enterprise sales.’

RBC currently has an Outperform rating and $11.00 price target on Sezzle, implying significant upside from current price levels.

YTD the Sezzle share price has risen 292%.

Ally Financial by comparison has struggled, with its stock dropping a little over 20% since January, last trading at US$24.19 per share.

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