Square (SQ) is on a one-way ticket downward after third-quarter earnings released on November 7th reported a weak outlook for the current quarter. For Q3, Square did outdo the Street’s consensus of $413 million with adjusted revenue of $431 million, but it doesn’t seem to be enough for Wall Street. The company predicts it will have EPS between 12 and 13 cents, which falls short of consensus expectations of 15 cents for Q4. The numbers worry analysts and investors that the payment company has a gray future ahead.
Despite the EPS instability, top Analyst Joseph Foresi of Cantor remains bullish. He raises his 12-month price target to $91 from $76 and maintains an Overweight rating on SQ stock. Foresi says he’s attracted to Square’s increasing market penetration and end user growth.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Joseph Foresi has a yearly average return of 18.7% and an 80% success rate. Foresi has a 77.3% average return when recommending SQ, and is ranked #8 out of 4,887 analysts.
“We expect $1,572mn in revenue, up from our prior estimate of 1,532mn. We expect $0.45 in EPS, up from our prior estimate of $0.44. We expect 2019 adjusted revenue of $2,233.9 million, up from $2,148 million, and 2019 adjusted EPS of $0.74, up from $0.72. We note we are decreasing our margin expansion expectation in 2019 to 250bps from 400bps to be conservative consistent with managements comments,” Foresi said.
Foresi’s vote of confidence comes from “an improving margin profile, driven by SG&A leverage and an increasing margin contribution from other services. We value SQ at a premium to its peer group for its well above industry growth rates and potential for further margin expansion.”
Foresi isn’t the only one on the block backing the payment company. Reviews from 27 analysts surveyed by TipRanks (in the last three months) show 15 are bullish on SQ stock, while 10 are sidelined and 2 are bearish. The consensus price target is $90.58, implying a 21% upside from where the stock stands currently. (See SQ’s price targets and analyst ratings on TipRanks)