| To: Glenn Petersen who wrote (19) | 8/2/2019 9:57:38 AM | | From: Glenn Petersen | | | | SQ is down 16% this morning.
Square falls 7% after forecasting lower-than-expected guidance
Published Thu, Aug 1 2019 3:59 PM EDT
Updated Thu, Aug 1 2019 6:15 PM EDT
Kate Rooney @Kr00ney
Key Points
- Adjusted third-quarter earnings per share guidance came in below Wall Street estimates. The company issued a range of between 18 cents and 20 cents per share, compared to 22 cents analysts had expected.
- Square announced a deal to sell its food delivery company Caviar to DoorDash for $410 million.
- Square’s gross payment volume came in at $26.8 billion vs. $26.9 billion Wall Street had expected.
Shares of Square dropped as much as 8% in after-hours trading Thursday after the payments company issued weaker-than-expected guidance. The company still beat analysts’ earnings and revenue expectations for the second quarter.
Here’s how Square did compared with what Wall Street was looking for:
- Earnings: 21 cents per share, vs. 17 cents forecast by Refinitiv.
- Adjusted revenue: $563 million vs. $557.1 million, forecast by Refinitiv.
Adjusted third-quarter earnings per share guidance came in below expectations. The company forecasted a range of between 18 cents and 20 cents per share, compared to 22 cents analysts had expected. Square did not update its full-year guidance.
“The third quarter is an important time for us to invest,” Square CFO Amrita Ahuja said on a call with reporters. “We expect these investments to benefit us and to drive growth in the future.”
Adjusted revenue rose to $563 million in the second quarter, a 46% jump year over year. Gross payment volume came in at $26.8 billion vs. the $26.9 billion Wall Street had expected. More than half of Square’s payment volume came from larger sellers.
The company updated investors on its popular peer-to-peer Cash App — largely seen as a competitor to PayPal’s Venmo. Excluding bitcoin trading, which launched on the app last January, revenue on the app came in at $135 million for the second quarter. That’s up from “negligible” revenue when the app first launched three years ago, Ahuja said on a call with analysts.
Square also launched a debit card for businesses in January, which the CFO said was “driving daily utility” on Square as customers “increasingly used the cash card as a spending tool.” In June, Square said in its shareholder letter that roughly 3.5 million people used the card for daily purchases like food, groceries, transportation or at big box retailers.
Square also announced a deal to sell its food delivery company Caviar to DoorDash for $410 million. The acquisition will be a mix of cash and DoorDash preferred stock and is expected to close at the end of this year. According a securities filing, Square bought Caviar for $44.3 million in 2014.
CEO Jack Dorsey, who also runs Twitter, said in the move was meant to increase Square’s focus on its business and consumer ecosystems.
“We have seen a lot of opportunity to strengthen both these ecosystems but those opportunities require more focus and more investment,” Dorsey said on a call with analysts. “To increase our focus, we decided to sell our Caviar business to DoorDash.”
Square’s stock had been on a tear this year with a more than 40% rally since January, compared to a 20% rise in the S&P 500.
The San Francisco-based company is best known for its credit card processor, payment hardware and growing Cash App. Square also facilitates small business loans through Square Capital. During the second quarter, Square facilitated 78,000 loans totaling $528 million — a 36% jump year over year.
The company also applied for a special industrial loan company license that allows less traditional financial firms to accept government-insured deposits. When asked on the call, Square said it did not have an update on the status of its banking application.
cnbc.com |
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| To: Glenn Petersen who wrote (20) | 8/2/2019 10:19:31 AM | | From: inspbudget | | | | Seems like a really extreme reaction to lowered guidance.
Down 16% even when they hit their earnings target, and with good yoy figures?
I suppose folks just wanting an excuse to take profits and run.
Was sitting pretty yesterday, today I'm solidly underwater by about $10 - ugh.
SQ should recover to the mid 70's as cooler heads prevail in a few weeks time - I hope. |
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| To: Glenn Petersen who wrote (22) | 8/2/2019 2:23:05 PM | | From: Zen Dollar Round | | | | Yep, not a good time to release a disappointing earnings report or lowered guidance for any company.
Apple has had the same reaction to its stock and it surprised many analysts with its earning and guidance. It's now trading below its pre-earnings price. |
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| From: AmigaComputer | 8/10/2019 8:16:54 PM | | | | | | | To me, the sizeable selling off, the day after the disappointing Q2 announcement, tumbling the stock by 30% from its 52 week high, i feel could be in part due to Square selling Caviar for $410m to DoorDash. For those unfamiliar, Caviar is yet-another food delivery business. To me, the sale makes sense. Square should stick to its payment business model and not be trying to follow whats hot right now, entering markets that don't fit. On the bright side to the stock bad news, because Square bought Caviar for $44m they ended up making over $360m profit :) |
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| To: AmigaComputer who wrote (24) | 8/11/2019 2:53:23 AM | | From: Zen Dollar Round | | | | | I didn't understand the negative reaction to the Caviar sale either. I had never even heard of Caviar nor did I know Square owned them. You're right, they don't need to be in that market given the number of players already there. |
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| To: Zen Dollar Round who wrote (25) | 8/11/2019 12:47:58 PM | | From: inspbudget | | | | I hope the stock price will recover. The selling of the past few days has been extreme and illogical, IMO.
The company is still doing well and beat expectations - but a 25% drop in value because of a lower guidance? Its only a foretasted number, not an actual performance. |
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| To: SI Ron (Crazy Music Man) who wrote (27) | 9/16/2019 1:12:58 PM | | From: inspbudget | | | | Must admit that SQ has not performed well lately; presently sitting on fairly large losses, having bought a few hundred at $78.
There have been more hit pieces appearing on SA lately, a sign that shorts are feasting happily on the decline.
But from what I have heard, the company appears to be doing its usual thing, with nothing really bad happening other than general poor sentiment in the sector.
Hoping for improvement but resigned to possibly having to wait a long time. |
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