Shares in Square Inc. (SQ) depreciated 3.5% in pre-market U.S. trading after the payment processor saw its losses almost triple in the first quarter as the coronavirus pandemic triggered a decline in payment transactions by its business customers.
Losses in the first quarter ballooned to $105.89 million, or 24 cents a share, from a loss of $38.15 million, or 9 cents a share, in the year-ago-period. Adjusted net loss per share amounted to 2 cents, versus earnings’ expectations of 13 cents during the same comparative period.
Square’s stock slid 3.5% to $65.74 in pre-market U.S. trading after the company said it expected a “material impact” in its second-quarter results due to the economic ramifications of the coronavirus pandemic. As a result, it is not providing second-quarter or full-year 2020 financial guidance.
“During the last two weeks of the quarter, our seller ecosystem experienced a significant slowdown due to the impacts of COVID-19, with seller GPV (Gross Payment Volume) down 35% year over year,” Square said.
Square disclosed that in In April, seller gross payment volume was down 39% year-over- year, while the company saw “modest” improvement during the second half of the month.
Five-star analyst Mark Palmer at BTIG maintained his Hold rating on the stock saying that the stock “appears fully valued” after surging almost 79% since March 20.
“While we continue to be impressed by the performance of Cash App, we believe questions about how many of SQ’s Sellers will ultimately survive the pandemic are likely to linger,” Palmer wrote in a note to investors.
Overall, Wall Street analysts have a Moderate Buy rating on the stock split into 14 Buys, 13 Holds and 2 Sells. The $65.35 average price target indicates 4% downside potential in the shares in the coming 12 months. (See Square stock analysis on TipRanks).
As of the end of the first quarter, Square had $3.4 billion in available liquidity, including $3.1 billion in cash, cash equivalents, restricted cash, and investments in marketable debt securities.
“We have a strong and flexible balance sheet and believe that even in a prolonged downside scenario, we are positioned with sufficient liquidity to weather volatility over the next two years,” the company said.
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