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Square's (SQ) Robust Portfolio is Likely to Aid Q2 Earnings

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Square, Inc. (SQ - Free Report) is slated to report second-quarter 2018 results on Aug 1.

The company’s comprehensive commerce ecosystem will continue to bolster its presence in the digital payment space globally. Notably, this ecosystem allows the sellers to combine software, hardware and payments services in order to accept payment from the customers through the company’s wide range of online payment products

Moreover, Square’s focus on expansion of financial services offering is anticipated to be a significant growth driver backed by increasing demand for payments processing and mobile-commerce services among small businesses worldwide.

All these factors are likely to drive the Gross Payment Volume (“GPV”) in the to-be-reported quarter which happens to be the key metric for the company’s top-line growth.

GPV in the last reported quarter increased almost 31% year over year to $17.8 billion, driven by growth in larger seller base. GPV from larger sellers contributed 47% to total GPV and surged 44% year over year.

The Zacks Consensus Estimate for GPV for the second quarter is pegged at $21.4.

Click here to know how the company’s overall Q2 performance is likely to be.

Expanding Services Portfolio: Key Catalyst


The company’s robust product portfolio and continued efforts toward expansion through strategic partnerships and acquisitions remains positive.

During the second quarter, Square completed the acquisition of Zesty, a catering platform. The buyout has added strength to the corporate ordering business of Caviar, Square’s food ordering platform.

With the help of Zesty, the company is able to attract more and more restaurants on its platform as it allows them to grab high-margin corporate orders.

Further, Square rolled out an integrated point of sale solution for restaurants, named Square for Restaurants which ensures fast and accurate operations by helping the managers in updating menus as well as floor layouts easily and quickly across multiple terminals and locations.

Consequently, this will benefit the restaurant base of the company.

Additionally, the company completed the buyout of Weebly in the second quarter. This is likely to improve Square’s omni-channel business by combining Weebly’s web presence tools with its in-person and online offerings. This will enhance the company’s service to sellers.

Consequently, seller base is likely to improve with the growing demand for omni-channel business solutions.

Further, Square Register’s innovative features help in retaining the existing sellers and attracting new sellers to its platform.

Nevertheless, Square’s entry into the bitcoin space with its robust Cash App remains a tailwind. Moreover, the global expansion of Cash App and emerging trend of cryptocurrency trading will continue to benefit the company’s second-quarter results.

We believe the company’s innovative product lines will aid its GPV growth.

Zacks Rank and Stocks to Consider

Square carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Micron Technology (MU - Free Report) , Analog Devices (A - Free Report) and Stoneridge (SRI - Free Report) . While Micron Technology sports a Zacks Rank #1 (Strong Buy), Analog Devices and Stoneridge carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Micron Technology, Analog Devices and Stoneridge is pegged at 8.18%, 12.4% and 8.5%, respectively.

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