What to watch in Square earnings report
Square (SQ) is scheduled to report results of its third fiscal quarter after the market close on November 8, with a conference call scheduled for 5:00 pm EDT.
What to watch for
During the company’s last earnings call, Square said it sees third quarter adjusted earnings per share of 4c-5c and revenue of $562M-$568M. Square also raised its 2017 adjusted earnings per share outlook to 21c-23c from 16c-20c, and its 2017 net income outlook to (21c)-(19c) from (24c)-(20c).
Additionally, the company sees 2017 revenue between $2.14B-$2.16B.
2. BANKING BUSINESS
Back on September 7, The Wall Street Journal reported that Jack Dorsey’s Square was looking to get into the banking business and was planning to submit an application to form a wholly owned bank based in Utah. The unit, which will be called Square Financial Services, would offer loans and deposit accounts to small businesses and be capitalized with $56M in cash, the publication noted.
3. UPSIDE, RISING VALUATION
On October 11, Oppenheimer analyst Jed Kelly initiated Square with an Outperform and $35 price target saying he sees continued upside from execution on core initiates to expand into multiple revenue channels.
The analyst told investors he believes Square’s cohesive user experience is enabling the company to create a differentiated product that is in the early stages of utilizing its vast payment data to build an ecosystem for small businesses that can obtain products such as loans, marketing services, inventory management and ecommerce solutions.
Later in the month, Deutsche Bank analyst Bryan Keane raised his price target for Square to $37 saying he expects “robust” revenue growth when the company reports quarterly results.
Continued business momentum and rising sector valuations drive the new price target, the analyst noted, reiterating a Buy rating on Square.
His peer at Nomura Instinet also raised his price target on the name to $45 from $33. Analyst Dan Dolev argues that the third quarter report will “prove to be a defining moment” with the shares up 147% year-to-date. The analyst’s study showed that the consensus “chronically underestimates” Square’s profitability. He expects a “stellar” second half of the year with adjusted EBITDA potentially reaching $145M-$150M.
4. VALUATION TOO HIGH
Meanwhile, earlier this month, Stifel analyst Scott Devitt downgraded Square to Hold from Buy ahead of the company’s third quarter earnings. While he expects a strong quarter, the analyst noted the stock is up 168% year-to-date.
5. NEW PRODUCTS
On October 31, Square unveiled its newest hardware offering, Square Register, a versatile, fully integrated point-of-sale, built in-house to work seamlessly with any business.
Square Register is priced to offer larger sellers a fully integrated point-of-sale solution at $999, or with a convenient financing option of $49 per month for 24 months. Sellers can accept all forms of card-present payments with a new, simple transaction rate of 2.5% + 10c per transaction.
SQ last traded at $36.59. It has a 52-weeks trading range of $11.43 – $37.75.
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