Square Shares Took a Nose Dive After Reporting Earnings

02:18 05/04/2019

Shares of Square SQ  were plummeting after the company reported financial results this week on Wednesday. The stock dropped 8% in after-hours trading as Wall Street showed its concerns over the company missing expectations on gross payment volume.

For the first quarter, the San-Francico based company, reported adjusted earnings of 11 cents, which topped expectations by 3 cents according to Refinitiv consensus estimates. Revenue at $489 million was also better than the $478 million that was expected.

The company, known for its popular peer-to-peer Cash app, reported gross payments volume of $22.6 billion which was under the $22.8 billion expected.
Transaction-based revenue was $657 million, showing a growth of 26%.

Subscription and services-based revenue soared 126% to $219 million, which was essentially driven by the company's Cash App, Caviar, Square Capital, and Instant Deposit for sellers.

Within Cash App, the company continued to grow the number of monthly active Cash Card customers and saw an increase in transaction frequency per customer. Square Capital facilitated about 70,000 loans totaling $508 million, up 50% year-over-year in the quarter.

“We have seen meaningful traction with the Cash App and believe we are just at the beginning with our seller ecosystem,” Square CFO Amrita Ahuja said. “Not only are we growing the base of monthly active users, but we’re growing the engagement per user — those have compounding effects in the results of our business.”

CEO Jack Dorsey highlighted the some good things from the quarter and said on the earnings call, 'So one quarter ended into 2019, what's been top of mind for me and us has been around ecosystem that we're building. This is our strongest competitive differentiator. It not only benefits our customers, wholesales and increasingly individuals with the Cash App, but also benefits our internal teams. For our internal teams, it allows us to move a whole lot faster. Some examples of this is because we had and built the e-commerce API, we're able to very quickly build virtual terminal and built to scale, and because we built the Cash Card that enabled us to build the Square Card to offer a similar offering for sellers.'

'This quarter, we re-launched Square for Retail with an applet model. This allows us to add features like invoices that were originally developed for Square point of sale, directly to Square for Retail. So generally, we’re going to continue to invest into this ecosystem. We do think it sets us apart from all of our peers and competitors in the industry, allows us to move faster and faster every single day.'

'We’ve been improving our tools for sellers to combine online and in person sales. We’ve been talking about omni-channel for quite some time. This quarter, we launched the new Square Online store. And we made it so that -- it has automatic syncing of both online and in-person data. So all of the sellers' items, orders, inventory and prices are synced automatically, which is another result of our ecosystem and using our internal tools to have much more impact and to move faster.'

This article has been provided by a Chasing Markets contributor. All content submitted by this author represent their personal opinions, and should be considered as such for entertainment purpose only. All opinions expressed are those of the writer, and may not necessarily represent fact, opinions, or bias of Chasing Markets.
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