Square released a mixed results report on Thursday, with one analyst saying the results “lacked spice.” Several Wall Street analysts have lowered their earnings forecasts for this calendar year, but general sentiment on the stock still looks bullish.
Analysts argue that Square (ticker: SQ) has many new growth engines, including more crypto-related products and services. Also on the list is Square’s planned acquisition of the âbuy now, pay laterâ company Afterpay, which is scheduled to close in the first quarter of 2022.
Square’s third quarter results weren’t great. The company reported total gross profit of $ 1.13 billion, which is slightly below consensus forecast of $ 1.15 billion. Adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, was $ 233 million, beating plan by $ 217 million.
Square reported $ 0.37 in earnings per share, missing the forecast by a dime.
A key issue was the growth in gross profit for Square’s Cash app. Based on two-year trends, growth slowed from a compound annual rate of 128% in the second quarter to 104% in the third quarter, according to Mizuho Securities analyst Dan Dolev. The deceleration is due to slower growth in Bitcoin revenue, which users buy through the Cash app, as well as lower growth in software and services, and transaction-based revenue, Dolev said.
While the overall result “lacked pizazz”, in his opinion, there were reasons to continue to recommend the action, including heavy inflows into Cash App. The company now offers mobile check and paper money deposits in the app. People can add money with a card loaded at retailers like
Square also markets Cash App to children, with the goal of bringing it to teens ages 13 to 17, a market of 20 million people in the United States. payments on individual purchases.
Square is also digging deeper into cryptography. Cash App has become a digital wallet for Bitcoin. Users bought and sold more than $ 1.8 billion in currency during the quarter, giving Square a 2% reduction in related fees. The company is stepping up its investments in crypto-related products and services, launching a business unit called TBD that will include a platform for decentralized finance services, or DeFi, and other Bitcoin-related products.
“We are going to build a hardware wallet, we are exploring Bitcoin mining, a consumer device to mine Bitcoin at home or in a business for our sales businesses,” Square CEO Jack Dorsey said during a call with analysts. The company plans to publish a white paper on the project on November 19, he added.
However, several analysts have revised their forecasts downwards. Dolev reduced its full-year Ebitda outlook to $ 968 million from $ 1 billion. MoffettNathanson analyst Lisa Ellis said she expects EPS of $ 1.57 this year, up from $ 2.07 previously. It also lowered its 2022 estimates.
But the two analysts reiterated the purchase odds on the title, just like several others. Wolfe Research’s Darrin Peller argued that investors should use a drop in price to accumulate stock, writing that the quarter should be viewed as “a clearing event” and “a buying opportunity.”
Susquehanna’s financial analyst James Friedman also reiterated a “positive” rating on the stock, with a price target of $ 300.
Square’s action hasn’t been a winner for months, however. It is down 11% since early August against a 7.6% gain for the
index. The stock was underperforming on Friday; shares of the payment company were down 2.2% to around $ 241, while the Nasdaq Composite Index was ahead 0.6%.
Write to Daren Fonda at [email protected]