Square SQ 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.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Square & the Pandemic ” data-reactid=”14″>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 Venmo and other P2P offerings from traditional giants such as JPMorgan Chase JPM.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="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.” data-reactid=”16″>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.”
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Outlook ” data-reactid=”35″>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, Apple AAPL, Microsoft MSFT, 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.
Add Comment