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Square (SQ) Up 16.7% Since Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Square, Inc. (SQ - Free Report) . Shares have added about 16.7% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Square Q1 Loss Narrower than Expected, Revenues Beat
Square reported narrower-than-expected first-quarter 2017 loss with revenues beating the Zacks Consensus Estimate.Adjusted loss came in at 3 cents per share compared with the Zacks Consensus Estimate of a loss of 17 cents per share.
Revenues
Revenues came in at $461.6 million, surpassing the consensus mark of $450.7 million. They were up 2.1% sequentially and 21.7% on a year-over-year basis. Revenues came well ahead of the company’s guided range of $440 million and $452 million.
Transaction-based revenues of $403.5 million grew 0.2% sequentially and 34.3% year over year. The year-over-year rise was driven by strengths in Square’s comprehensive commerce ecosystem and managed payment solutions.
Subscription and services based revenues of $49.1 million were up 21.1% on a sequential basis and a massive 106.2% on a year-over-year basis. The year-over-year increase was driven by continuous product line expansion and improvements in existing products. Significant contributions came from Caviar, Square Capital, and Instant Deposit.
Hardware revenues were $9 million, up 1.7% sequentially but down 44.3% year over year. The year-over-year decline was the result of fulfillment of the majority of the backlog of pre-orders for the company’s contactless and chip reader
Operating Results
Non-GAAP gross margin was 38%, up 61 basis points (bps) sequentially and 815 bps year over year. The year over year growth was driven by higher revenues and strong product mix. Operating expenses of $180 million were up 4.1% from $173 million in the previous quarter and 19% from $151.2 million in the year-ago quarter.
The company reported non-GAAP operating loss of $4.6 million, higher than the previous quarter’s loss of $4 million but much lower than the year-ago quarter’s loss of $6.5 million.
Non GAAP net loss was $11.1 million compared with $10.7 million in the previous quarter and $39.9 million in the year-ago quarter. GAAP net loss was $15.1 million or loss of 4 cents per share compared with $15.2 million or loss of 4 cents per share in the previous quarter and $96.8 million or loss of 29 cents per share a year ago.
Balance Sheet and Cash Flow
At the end of the first quarter, cash and cash equivalents balance was $704.5 million compared with $452 million in the previous quarter. The company has long-term debt of $345.7 million. Square generated $44 million in cash from operating activities and spent $25.4 million on capex.
Outlook
For the second quarter of 2017, Square expects net revenue between $532 million and $538 million. Adjusted EBITDA is expected in the range of $25 million to $28 million. Adjusted EPS is expected between 3 cents and 5 cents.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
At this time, Square's stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated a grade of 'F' on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is suitable solely for growth investors.
Outlook
The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
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Square (SQ) Up 16.7% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Square, Inc. (SQ - Free Report) . Shares have added about 16.7% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Square Q1 Loss Narrower than Expected, Revenues Beat
Square reported narrower-than-expected first-quarter 2017 loss with revenues beating the Zacks Consensus Estimate.Adjusted loss came in at 3 cents per share compared with the Zacks Consensus Estimate of a loss of 17 cents per share.
Revenues
Revenues came in at $461.6 million, surpassing the consensus mark of $450.7 million. They were up 2.1% sequentially and 21.7% on a year-over-year basis. Revenues came well ahead of the company’s guided range of $440 million and $452 million.
Transaction-based revenues of $403.5 million grew 0.2% sequentially and 34.3% year over year. The year-over-year rise was driven by strengths in Square’s comprehensive commerce ecosystem and managed payment solutions.
Subscription and services based revenues of $49.1 million were up 21.1% on a sequential basis and a massive 106.2% on a year-over-year basis. The year-over-year increase was driven by continuous product line expansion and improvements in existing products. Significant contributions came from Caviar, Square Capital, and Instant Deposit.
Hardware revenues were $9 million, up 1.7% sequentially but down 44.3% year over year. The year-over-year decline was the result of fulfillment of the majority of the backlog of pre-orders for the company’s contactless and chip reader
Operating Results
Non-GAAP gross margin was 38%, up 61 basis points (bps) sequentially and 815 bps year over year. The year over year growth was driven by higher revenues and strong product mix. Operating expenses of $180 million were up 4.1% from $173 million in the previous quarter and 19% from $151.2 million in the year-ago quarter.
The company reported non-GAAP operating loss of $4.6 million, higher than the previous quarter’s loss of $4 million but much lower than the year-ago quarter’s loss of $6.5 million.
Non GAAP net loss was $11.1 million compared with $10.7 million in the previous quarter and $39.9 million in the year-ago quarter. GAAP net loss was $15.1 million or loss of 4 cents per share compared with $15.2 million or loss of 4 cents per share in the previous quarter and $96.8 million or loss of 29 cents per share a year ago.
Balance Sheet and Cash Flow
At the end of the first quarter, cash and cash equivalents balance was $704.5 million compared with $452 million in the previous quarter. The company has long-term debt of $345.7 million. Square generated $44 million in cash from operating activities and spent $25.4 million on capex.
Outlook
For the second quarter of 2017, Square expects net revenue between $532 million and $538 million. Adjusted EBITDA is expected in the range of $25 million to $28 million. Adjusted EPS is expected between 3 cents and 5 cents.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
Square, Inc. Price and Consensus
Square, Inc. Price and Consensus | Square, Inc. Quote
VGM Scores
At this time, Square's stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated a grade of 'F' on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is suitable solely for growth investors.
Outlook
The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.