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Will Guidance Revision Impact Square Stock?


Sep. 4 2020, Updated 6:56 a.m. ET

Square (NYSE:SQ) fell on Thursday alongside the broad sell-off in stocks. Investors still fear the coronavirus outbreak. The stock declined by 3.71% yesterday. The Dow Industry Average fell by 3.58%, while the S&P 500 fell by 3.39%. The tech-heavy Nasdaq Composite fell 3.10% on the same day.

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Guidance revision could impact Square stock

Investors eyeing Square stock should be aware that the company revised its earnings guidance for the first quarter and fiscal 2020. On Thursday, Square revised its original EPS expectations for the first quarter and fiscal 2020.

For the first quarter, Square expects to post a loss per share of $0.04–$0.02. Originally, the company forecast a smaller loss per share of $0.01–$0.03. For fiscal 2020, Square expects a loss per share of $0.15–$0.11. Previously, the company forecast a loss per share of $0.05–$0.09 for the year. The company didn’t change its revenue forecast for the first quarter and fiscal 2020.

Square said that it revised its earnings expectations to take increased interest expenses into account and the costs for the $1.0 billion bond sale. The company wants to raise more cash to fund its development. Therefore, Square kicked off a process to raise $1.0 billion by selling convertible notes that mature in five years. The company closed 2019 with $2.1 billion in cash reserve.

The company’s war chest got a boost from selling Caviar—its food delivery business. Square sold Caviar to DoorDash for $410 million. The company likely got a decent gain from the transaction. Square purchased the business for $44.3 million in 2014.

Lower earnings expectations could impact investors’ sentiment on Square stock.

Square and PayPal adjust their performance outlook

Square revised its earnings outlook for the first quarter and fiscal 2020 a week after PayPal (NASDAQ:PYPL) adjusted its performance outlook. On February 27, PayPal warned that its first-quarter revenue will likely be at the lower end of the original guidance.

While Square cut its earnings expectations due to rising costs, PayPal cited the coronavirus for its action. According to PayPal, the coronavirus has hit global business activities, which diminishes its revenue opportunities. Square and PayPal both provide technology-based financial services to merchants and individuals.

The sell-off on Thursday slashed Square stock’s YTD (year-to-date) gains to 22%. However, the stock is still ahead of PayPal, which has YTD gains of 3.7%.


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