Square stock did an about-face today as investors punished the company even though it beat estimates in its first earnings report as a public company. Analysts remain wary on Jack Dorsey’s “other” company, however, although it’s doing much better than Twitter.
Square’s losses widen
Square’s sales climbed 64% year over year, while its adjusted EBITDA came in at -$6 million, which was an improvement from -$11 million in the fourth quarter of 2014. Gross payment volume was $10.2 billion, and core transaction gross profit climbed 43% year over year while Software and Data Product sales skyrocketed 272% from the previous year to hit $22.4 million. Square Capital originated almost $150 million in loans.
This year has been a record-breaking year for initial public offerings with companies going public via SPAC mergers, direct listings and standard IPOS. At Techlive this week, Jack Cassel of Nasdaq and A.J. Murphy of Standard Industries joined Willem Marx of The Wall Street Journal and Barron's Group to talk about companies and trends in Read More
Across the board, Square did pretty well, analysts from Deutsche Bank and Pacific Crest Securities agree, although both maintained their equivalent of a Hold rating after the company’s earnings report. Deutsche Bank analyst Bryan Keane said the payments processor posted a “solid start as a public company.” Management guided for full-year adjusted revenues of $600 million to $620 million, representing a 33% to 37% year over year growth. They guided to adjusted EBITDA of $6 million to $12 million with a goal of turning profitable in the second half of the year.
Keane is wondering just how conservative Square’s guidance is, how quickly it can grow its EBITDA margins, and about the pace of the top-line deceleration. He added that Square Capital’s strong results drove the company’s Software and Data Product sales and that he expects momentum to continue. He said there is an “underlying profitability shining through” and maintained his $13 per share price target on Square stock following the earnings report.
Square stock’s fair-value range upped at Pacific Crest
Pacific Crest analyst Josh Beck continues to rate Square stock at Sector Perform but has raised his fair-value range to between $12 and $13 per share. He said the company’s update on new products was positive, particularly Instant Deposit, which enables merchants to pay employees in under a minute. He said about 500,000 deposits of between $100 and $500 would drive $500,000 to $2.5 million in revenue.
Square stock surged on Wednesday as investors anticipated a strong earnings report and opened today above $12 per share, but shares plunged during regular trading hours today, falling by as much as 7.24% to $11.14 despite the solid analyst reviews.