Stocks

Square Inc Q4 Earnings Preview: Is Another Beat-And-Raise On Tap?

Square Inc (NYSE:SQ) is slated to release its Q4 earnings results on Tuesday after closing bell, and it looks like Wall Street is betting on a strong print from Jack Dorsey’s other company. Consensus estimates Square earnings for Q4 2017 at 7 cents per share on a non-GAAP basis on $266.5 million in net revenue and $38.6 million in EBITDA. On a GAAP basis, consensus projects a loss of 4 cents per share.

square earnings

Management guided for Square earnings to be between 5 cents and 6 cents per share on a non-GAAP basis with GAAP losses of 7 cents to 6 cents per share. They guided gross revenue at $585 million to $595 million, versus the consensus of $600.7 million, and net revenue at $262 million to $265 million.

Square also guided for adjusted EBITDA to be between $34 million and $37 million, versus the consensus of $38.3 million, and the adjusted EBITDA margin to be 13%at the midpoint, compared to the consensus of 14.4%.

Buckingham Research Group analyst Chris Brendler maintained his Buy rating and $50 price target on Square stock going into the Q4 2017 earnings release. He called the company’s current valuation “challenging,” but he still expects the Square earnings release to reveal another beat-and-raise quarter. He also expects this momentum to carry the company into 2019 and sees potential upside driven by a higher-than-expected take rate due to lower transaction costs in Q3.

In his own note last week, KeyBanc analyst Josh Beck boosted his price target for Square stock from $40 to $52 per share and reiterated his Overweight rating. He expects the Square earnings release to reveal a “strong” Q4 beat and a “conservative, yet beatable guidance factoring in reinvestment.”

He also pointed out that there are several ways the company can surpass $600 million in EBITDA, grouping its products into four main initiatives: “the move up-market, platform expansion, increased cross-sales, and consumer.” He added that most of these initiatives are still in their early cycles, so there could be plenty of room for “substantial outperformance” if the payments processor can scale all of them in an efficient manner. Beck thinks that the Square “franchise” is “still undervalued,” even though the company enjoys “nosebleed nominal multiples.”

Square has been grabbing headlines for its support of bitcoin, and some analysts have noted that the company’s stock has been moving roughly in step with the bitcoin price. BTIG analyst Mark Palmer warned in a recent note that Square stock “has become tethered to the movements of a volatile cryptocurrency.” He also said that the company now has a “live-with-it, die-with-it relationship” with bitcoin, which he doesn’t see as a good thing, despite the strong fundamentals the Street is looking for from it.

The bitcoin price rallied back above $10,000 again, only to pull back. Square stock, meanwhile, rallied by more than 3% in intraday trading on Monday, climbing as high as $46.85