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Square Drops 5.7% On 4Q Payment Volume Miss

Square reported better-than-expected 4Q results and registered robust year-over-year growth. However, shares of the financial services and mobile payment solution provider fell 5.7% in Tuesday’s extended trading session as its gross payment volume (GPV) missed estimates.

Square’s (SQ) 4Q adjusted earnings increased 39% to $0.32 per share year-over-year and beat Street estimates of $0.24. Revenues of $3.16 billion came in ahead of the consensus estimate of $3.11 billion and marked a year-over-year improvement of 141%. However, excluding bitcoin sales, total revenue was $1.4 billion.

Square revealed that it processed $32 billion in GPV during the quarter, up 12% year-on-year. However, 4Q GPV fell marginally short of analysts’ expectations of $32.1 billion.

The company’s overall financial results were driven by strong momentum across its Cash App segment, which contributed $2.17 billion to net revenues in 4Q, up 502% from the year-ago quarter. The business unit benefited from the strong adoption of bitcoin, with it generating $1.76 billion in revenues.

Sales at its Seller ecosystem grew 5% to $987 million. (See Square stock analysis on TipRanks)

Additionally, Square provided a business update for January 2021. Cash App’s gross profit increased 164% year-over-year, which was moderately higher than the 4Q growth of 162%.

The seller division’s gross profit was up 15% year-on-year, slightly higher than the 4Q increase of 13%. Seller’s GPV growth of 5% in January was slightly lower than the 6% increase registered in 4Q.

Ahead of the earnings release, Barclays analyst Ramsey El Assal raised the stock’s price target to $320 (25% upside potential) from $260 and reiterated a Buy rating. In a note to investors, Assal stated that Square’s Cash App ecosystem revenues have surged massively, but the product is relatively young. The analyst projects the company’s revenues to cross the $10 billion mark by 2025, reflecting a CAGR of 50%.

Overall, the Street has a cautiously optimistic outlook on the stock, with a Moderate Buy consensus rating based on 15 Buys and 9 Holds. The average analyst price target of $265.23 implies upside potential of about 3.4% from current levels. Shares have skyrocketed about 220% over the past year.

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Amit Singh
Amit Singh jumped into the world of stock analysis and investing after completing his Post Graduate Diploma in Finance in 2009. Before joining TipRanks in 2020, he worked as an equity research analyst for eight years. With a keen eye for identifying strategic investment opportunities, his work entails evaluating stocks, building financial models, writing company-specific research reports, and identifying the overall financial worth of companies in the consumer staples and technology sectors. In 2017, Amit found a way to combine his expertise in evaluating companies with his passion for writing. He has also worked with the financial research firm Market Realist.