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- Square shares fell by as much as 7% in after-hours trading on Wednesday after the company reported second-quarter earnings and revenue guidance that fell short of expectations.
- Last quarter, the mobile-payments company’s guidance also disappointed investors, prompting analysts to trim their expectations.
- Watch Square trade live.
Square reported second-quarter sales and profits guidance on Wednesday that disappointed analysts’ already tempered expectations, sending shares down by as much as 7% in after-hours trading.
Earnings forecasts for the mobile-payments company had already come down by about $0.04 a share in recent months after Square’s guidance last quarter fell short of expectations.
“Given the significant market opportunity ahead of us, we will continue to be purposeful as we reinvest in our business to drive long-term growth,” CEO Jack Dorsey and Amrita Ahuja, the company’s chief financial officer, said in a shareholder letter. “Our guidance for the full year of 2019 reflects both investment and growing profitability.”
Here’s what Square reported, compared with what Wall Street analysts surveyed by Bloomberg were expecting:
- Adjusted revenue: $489 million versus $479.4 million expected.
- Adjusted earnings per share: $0.11 versus $0.08 expected.
- Q2 adjusted revenue guidance: $545 million to $555 million versus $556.6 million expected.
- Q2 adjusted EPS guidance: $0.14 to $0.16 versus $0.18 expected.
“We are revising our net income (loss) per share guidance for the full year of 2019, primarily as a result of the first quarter mark-to-market valuation of our investment in Eventbrite,” the executives added in their shareholder letter.
Analysts have been telling clients that Square had to dazzle investors on several fronts — such as sales and EBITDA — to justify its pricey valuation of more than 100 times forward earnings.
“SQ has exceeded Street revenue and EBITDA estimates by an average of $15M and $3M, respectively, the past four quarters,” JPMorgan analysts led by Tien-tsin Huang wrote in a note to clients on April 23. “We see this momentum continuing in 1Q, which is required for SQ to maintain its premium valuation.”
Still, the analysts trimmed their 2019 and 2020 earnings expectations.
“We expect full year revenue guidance could move up, but see EBITDA holding firm recognizing now is the time for Square to invest in consumer/card initiatives; hence we are front loading more expenses for the year,” the JPMorgan analysts wrote.
“With lots of energy and competition for on-demand banking services like Cash App, we expect investments to drive habitual usage (e.g. Boost) to stay elevated,” they added.
Read an excerpt of Business Insider Intelligence’s Payments Briefing: Square is making a slew of updates across its product offering
In a mid-April note to investors, SunTrust analysts led by Andrew Jeffrey said that while the Square is the “most dynamic and disruptive name we follow,” its high valuation has everything priced in.
As such, the analysts trimmed their revenue and EBITDA expectations for this year and next.
More broadly, Wall Street analysts are nearly split between bullish and neutral. Of the analysts polled by Bloomberg, 18 rated the stock a “buy,” 16 recommended “hold,” and four said “sell.”
Square shares have jumped 32% this year through Wednesday’s close, but remain 26% below their all-time high of $101.15 set in October.
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