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Square Earnings Preview: How will the Coronavirus Impact the Fintech Firm?
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Square (SQ - Free Report) stock has surged 50% since March 23 as part of the market’s broader comeback. Wall Street wants to know how the coronavirus economic downturn will impact the fintech firm that relies heavily on smaller businesses.
Let’s dive into SQ and its outlook to help find out what to expect before Square reports its first quarter fiscal 2020 financial results after the closing bell on Wednesday, May 6.
Square & the Pandemic
Square, which helped kick-start the fintech age with its small, smartphone and tablet-connected credit card readers for small and micro-size businesses, has expanded into business loans, peer to peer payments, debit cards, and more. Today, its widely popular Cash App also competes against PayPal’s (PYPL - Free Report) Venmo and other P2P offerings from traditional giants such as JPMorgan Chase (JPM - Free Report) .
Despite its more diversified portfolio, Square shares suffered their worst day on record in mid-March, as many non-essential businesses began to close their doors as governments tried to slow the spread of the coronavirus. This included many coffee shops, restaurants, bars, and smaller brick-and-mortar businesses that Square’s devices and services are geared toward.
In fact, in-store discretionary spending accounts for roughly $3 out of every $5 in payments that Square processes, according to a Wall Street Journal report. This is a big problem since a large chunk of its revenue comes from transaction fees.
With this in mind, Square on March 24 withdrew its full-year 2020 guidance and lowered its Q1 revenue outlook to between $1.30 to $1.34 billion. This was down from its pre-coronavirus guidance that called for between $1.34 to $1.36 billion in first quarter revenue.
Square wrote in prepared remarks at the time that “While the beginning of March was relatively in-line with the company's expectations, over the trailing ten-day period Seller GPV has declined by approximately 25% year over year, with greater declines in recent days.”
Outlook
Square stock is down roughly 10% over the last 12 months but has soared 50% since March 23, after it sunk as low as $36.11 a share. SQ closed regular trading hours Monday at $63.69 a share. This gives it 25% more room to run before it reaches its 52-week highs.
Before we look ahead, overall Q1 earnings for the S&P 500 are projected to sink 12.5% on 2.1% higher revenues, based on our most recent Zacks data. And things are expected to get far worse in the second quarter. However, Amazon (AMZN - Free Report) , Apple (AAPL - Free Report) , Microsoft (MSFT - Free Report) , and other big tech names showed their resilience last week (also read: Tech Sector Shows its Earnings Power).
Our current Zacks consensus estimate calls for Square’s first quarter revenue to jump 36% to reach $1.30 billion—the low-end of SQ’s updated guidance. The fintech firm’s second quarter sales are then projected to fall 13.3%, with fiscal 2020 sales only expected to climb 4.5% to reach $4.92 billion. Investors should note that Square’s pre-coronavirus fiscal year revenue guidance came in at between $5.90 billion to $5.96 million.
SQ did pull its full-year guidance. But our estimate would represent a dramatic downturn from 2019’s 43% revenue growth and help highlight the coronavirus impact. Meanwhile, Square’s adjusted Q1 earnings are still projected to pop 18.2% to hit $0.13 a share.
Square’s adjusted Q2 EPS figure is projected to tumble 90.5% to $0.02 a share. SQ is then expected to see its full-year fiscal earnings fall over 36% to $0.51 a share.
Bottom Line
Square’s earnings revision picture has moved completely in the wrong direction recently, and the full impact of the coronavirus won’t be felt until next quarter. Therefore, interested investors likely want to wait on updates from SQ’s management team before jumping into a stock that has already soared 50% in six weeks.
SQ is currently a Zacks Rank #3 (Hold) that holds “F” grades for both Value and Momentum in our Style Scores system.
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Square Earnings Preview: How will the Coronavirus Impact the Fintech Firm?
Square (SQ - Free Report) stock has surged 50% since March 23 as part of the market’s broader comeback. Wall Street wants to know how the coronavirus economic downturn will impact the fintech firm that relies heavily on smaller businesses.
Let’s dive into SQ and its outlook to help find out what to expect before Square reports its first quarter fiscal 2020 financial results after the closing bell on Wednesday, May 6.
Square & the Pandemic
Square, which helped kick-start the fintech age with its small, smartphone and tablet-connected credit card readers for small and micro-size businesses, has expanded into business loans, peer to peer payments, debit cards, and more. Today, its widely popular Cash App also competes against PayPal’s (PYPL - Free Report) Venmo and other P2P offerings from traditional giants such as JPMorgan Chase (JPM - Free Report) .
Despite its more diversified portfolio, Square shares suffered their worst day on record in mid-March, as many non-essential businesses began to close their doors as governments tried to slow the spread of the coronavirus. This included many coffee shops, restaurants, bars, and smaller brick-and-mortar businesses that Square’s devices and services are geared toward.
In fact, in-store discretionary spending accounts for roughly $3 out of every $5 in payments that Square processes, according to a Wall Street Journal report. This is a big problem since a large chunk of its revenue comes from transaction fees.
With this in mind, Square on March 24 withdrew its full-year 2020 guidance and lowered its Q1 revenue outlook to between $1.30 to $1.34 billion. This was down from its pre-coronavirus guidance that called for between $1.34 to $1.36 billion in first quarter revenue.
Square wrote in prepared remarks at the time that “While the beginning of March was relatively in-line with the company's expectations, over the trailing ten-day period Seller GPV has declined by approximately 25% year over year, with greater declines in recent days.”
Outlook
Square stock is down roughly 10% over the last 12 months but has soared 50% since March 23, after it sunk as low as $36.11 a share. SQ closed regular trading hours Monday at $63.69 a share. This gives it 25% more room to run before it reaches its 52-week highs.
Before we look ahead, overall Q1 earnings for the S&P 500 are projected to sink 12.5% on 2.1% higher revenues, based on our most recent Zacks data. And things are expected to get far worse in the second quarter. However, Amazon (AMZN - Free Report) , Apple (AAPL - Free Report) , Microsoft (MSFT - Free Report) , and other big tech names showed their resilience last week (also read: Tech Sector Shows its Earnings Power).
Our current Zacks consensus estimate calls for Square’s first quarter revenue to jump 36% to reach $1.30 billion—the low-end of SQ’s updated guidance. The fintech firm’s second quarter sales are then projected to fall 13.3%, with fiscal 2020 sales only expected to climb 4.5% to reach $4.92 billion. Investors should note that Square’s pre-coronavirus fiscal year revenue guidance came in at between $5.90 billion to $5.96 million.
SQ did pull its full-year guidance. But our estimate would represent a dramatic downturn from 2019’s 43% revenue growth and help highlight the coronavirus impact. Meanwhile, Square’s adjusted Q1 earnings are still projected to pop 18.2% to hit $0.13 a share.
Square’s adjusted Q2 EPS figure is projected to tumble 90.5% to $0.02 a share. SQ is then expected to see its full-year fiscal earnings fall over 36% to $0.51 a share.
Bottom Line
Square’s earnings revision picture has moved completely in the wrong direction recently, and the full impact of the coronavirus won’t be felt until next quarter. Therefore, interested investors likely want to wait on updates from SQ’s management team before jumping into a stock that has already soared 50% in six weeks.
SQ is currently a Zacks Rank #3 (Hold) that holds “F” grades for both Value and Momentum in our Style Scores system.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>