Fintech startup Klarna has said that it is targeting profitability in 2023. The company’s valuation has taken a hit amid the continued pessimism toward loss-making growth companies.

Klarna lost $580 million in the first half of 2022 but is targeting profitability by the summer of next year. Klarna CEO Sebastian Siemiatkowski told CNBC that “We should be back to profitability on a month-by-month basis, not necessarily on an annual basis.”

Notably, like fellow startup tech companies, Klarna has also laid off its employees and in May it announced a 10% cut to its workforce. Siemiatkowski said that the company took the decision at the right time.

He said, “To some degree, all of us were lucky that we took that decision in May because, as we’ve been tracking the people who left Klarna behind, basically almost everyone got a job.”

Siemiatkowski added, “If we would have done that today, that probably unfortunately would not have been the case.”

Tech Layoffs Have Increased Over the Last Month

There indeed is some merit in his statement as tech layoffs have intensified this year. Tech giants like Meta Platforms, Twitter, Snap, and Amazon have announced mass layoffs over the last couple of months. Even Alphabet is under pressure from TCI Fund Management to cut its workforce.

In its letter to Alphabet, TCI also said that Alphabet should cut losses at Waymo, its self-driving unit. Several other companies have also exited the self-driving business amid spiraling losses.

TCI added that Alphabet stock is undervalued and the company should increase its stock buybacks. Most Wall Street analysts are also bullish on the Alphabet stock. We have a guide on how investors can buy Alphabet stock.

Klarna Took a Massive Haircut to Its Valuation

Earlier this year, Klarna took an 85% haircut to its valuation in a funding round. Commenting on the valuation cut, Siemiatkowski said that it reflects the “correction” in the fintech industry. Notably, even mature fintech players like PayPal have also crashed this year.

The turmoil in the stock market is also manifesting in startup companies. Given the turmoil in public markets, valuations of private startup companies have also come down.

Some of the biggest valuation cuts have come in Alibaba-backed Ant Financial, Instacart, and Klarna. TikTok-parent ByteDance’s valuation has also come down.

Klarna Has Not Talked About IPO Plans Lately

Instacart which was among the most widely awaited IPOs of 2022 has reportedly scrapped its listing plans amid the turmoil in the broader market. The US IPO market has been virtually dead this year amid the pessimism toward growth stocks.

The US IPO market has sagged this year as investors have been cold to new listings due to the mayhem in growth stocks. However, there is still investor interest in some of the upcoming IPOs like Chime. We have a list of some of the upcoming IPOs.

While Klarna hasn’t said anything recently on its listing plans, last year, Siemiatkowski said that he is “nervous” about an IPO given the volatility in stock markets.

Fed’s rate hikes have taken a toll on the valuation of growth companies which have their cash flows skewed to the future. Fed’s November meeting minutes have meanwhile raised hopes that the US central bank might now take a more dovish approach amid the slowing economy.

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