Banking & Finance

How Square Won Out After All in Q4

The last time that Square Inc. (NYSE: SQ) reported results, shares dropped in reaction despite a solid report, but that was more the result of profit-taking as shares had risen about 125% year over year at that point.

Square reported its most recent quarterly results after the markets closed on Wednesday. In this case, guidance disappointed, but Square ended up winning out after all, and shares are currently up about 70% in the past 52 weeks.

The payment processing firm posted $0.14 in earnings per share (EPS) and $464 million in revenue for the fourth quarter. That compared with consensus estimates of $0.14 in EPS on revenue of $454.1 million. The same period of last year reportedly had EPS of $0.08 and $282.6 million in revenue.

During the quarter, Square had a gross payment volume (GPV) of $23 billion, an increase of 28% year over year and 2% sequentially. At the same time, GPV from larger sellers grew 39% year over year and accounted for 51% of total GPV, up from 47% in the fourth quarter of 2017.

Subscription and services-based revenue was $194 million in the fourth quarter of 2018, up 144% year over year.

Looking ahead to the first quarter, the company expects to see EPS of $0.06 to $0.08 and revenue in the range of $472 million to $482 million. Consensus estimates call for $0.11 in EPS and $473.8 million in revenue.

CEO Jack Dorsey commented:

We are driving innovation and adoption of new services by reinvesting in our ecosystem: In the fourth quarter of 2018, revenue from products launched in the last five years was 37% of total net revenue and 51% of Adjusted Revenue, up from 22% and 36%, respectively, in the prior year period. Our investment activity is guided by our three ongoing focus areas: strengthening omnichannel commerce, expanding financial services, and growing current international markets. As we reinvest for growth, we are seeing strong momentum in our ecosystem: Notably, Cash App had more than 15 million monthly active customers in December 2018, which is more than double year over year. These three strategic areas represent long-term opportunities for Square to create meaningful value for our customers.

Shares of Square were last seen up over 1% to $80.64, in a 52-week range of $43.72 to $101.15. The consensus price target is $78.39.