Square Stock Fell after Quarterly Results

Mobile payment processing company Square (SQ) fell 8% on May 2 to close trading at $67.74. The stock is currently trading 46% above its 52-week low of $46.50 and 33% below its 52-week high of $101.15.

Square announced its first-quarter results on May 1 and reported revenue of $489 million, a rise of 53% YoY. Non-GAAP (generally accepted accounting principles) EPS rose by 83.3% YoY to $0.11 in the first quarter.

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Wall Street expected Square to post revenue of $479.4 million with EPS of $0.08 in the first quarter. So why did the stock tank despite an earnings beat?

Square reported gross payment volume (or GPV) of $22.6 billion. Though this metric rose 27%, it was marginally below analyst estimates of $22.8 billion. Square also provided mixed guidance for 2019 that did not sit well with investors.

Square stated that it expects revenue between $545 million and $555 million in the second quarter. Adjusted EBITDA is estimated between $90 million and $94 million with non-GAAP EPS between $0.04 and $0.16 in Q2 2019. These figures were below Wall Street sales and earnings estimates of $557 million and $0.18, respectively. For 2019, Square in fact, raised its guidance and expects sales between $2.25 billion and $2.28 billion, up from the prior forecast between $2.22 billion and $2.25 billion. Analysts expect Square’s revenue to rise 42.5% to $2.26 billion in 2019.

Square’s drop in stock has meant that the stock is trading 22.5% below analysts’ 12-month target estimates of $83.0. Out of 31 analysts covering Square, 17 have “buy” recommendations, and 14 have “hold” recommendations for the stock. There are no “sell” recommendations.