RBC backs Sezzle after it announced a three-year agreement with US based Target, saying it is a vote of confidence from enterprise retailers.
Sezzle’s products will be used both in-store and across Target’s digital platforms.
"Given the prolonged period of testing on the Target platform during the Proof of concept (POC) period, we think the integration should require minimum upgrades, while this is a material vote of confidence from enterprise retailers, which should benefit Sezzle in future partnerships with other large retailers.
"Target is among the top 10 largest retailers in the US in terms of both in-store and digital share of sales. Target saw ~$US94bn worth of revenue in 2020, with digital taking a share of ~18%. With apparel and beauty taking up a ~42% share of sales (2020), we think this partnership presents a material addressable market for SZL.
"A 0.5% penetration into Target’s Apparel and Beauty verticals alone should see a ~12% increase in SZL’s RBCe Underlying Merchant Sales (2021e). With the POC period seeing trials in 2 product categories, we see opportunity for penetration into multiple products categories.
"The familiarity of the Target business should see Sezzle benefitting in terms of higher conversion rates and customer usage, while overall, signing up with these large enterprises can materially move the dial for SZL."
RBC has an Outperform, Speculative Risk rating on the stock and a price target of $12.00. Sezzle last traded at $7.50 a share.
