Analyst Provides First Glance on Square Inc (SQ) 1Q:18 Earnings


Square Inc (NYSE:SQ) investors reacted to the first-quarter earnings report with skittishness, sending shares down nearly 7% to $45.45 in after-hours trading Wednesday. Why? The upper end of management’s 2Q18 adjusted EPS guidance of $0.09 to $0.11 was below the consensus estimate of $0.12. That’s why.

To the company’s credit, it posted revenue of $307 million for the first quarter, beating consensus estimates of $293 million. Square also reported EPS of $0.06, which were in line with the Street.

Nomura analyst Dan Dolev commented, “Overall, while SQ provided better-than-expected results on nearly every metric, it was putting the breaks on FY adj. EBITDA guidance, and potentially some fresh news by Bloomberg on Amazon getting deeper into payments, that may weigh on the stock. Should investors worry about SQ? We view any pullback as a potential additional buying opportunity given that fundamentals are strengthening across the board (e.g. net take rate is growing, subscription revenue is accelerating and SQ Capital is re-accelerating too). Moreover, increasing the revenue guidance by $100mn (ex. Weebly) despite just a $15mn “beat” is a clear sign of strength. Most importantly, not increasing adj. EBITDA only means that SQ is reinvesting in the business, which suggests future growth opportunities are plenty.”

As such, Dolev reiterates a Buy rating on Square shares, with a price target of $65, which represents a potential upside of 34% from where the stock is currently trading.

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Dan Dolev has a yearly average return of 13.8% and a 64% success rate. Dolev has a 71.1% average return when recommending SQ, and is ranked #505 out of 4773 analysts.

Where does the rest of the Street side on this volatile payment player? It appears mostly bullish, as TipRanks analytics demonstrate SQ as a Buy. Out of 27 analysts polled in the last 3 months, 16 are bullish on Square stock while 9 remain sidelined and 2 are bearish. 

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