Shares of Square SQ have climbed over 30% in 2019 to outpace the S&P 500’s 17% climb and nearly match fellow fintech power PayPal’s PYPL jump, which was driven by its recent quarterly earnings beat. Despite the climb, Square stock still has plenty of runway before it comes close to its 52-week highs.
With that said, let’s see if investors should think about buying Square heading into its first quarter fiscal 2019 earnings release that is due out after the closing bell on Wednesday, May 1.
Square helped kick off the current fintech revolution back in 2009, when it launched its first credit card processor and software aimed to help micro-businesses and entrepreneurs adapt in an ever-more cashless society. Since then, Square, with the help of CEO Jack Dorsey—who also runs Twitter TWTR—has transformed into a well-rounded financial services firm. The San Francisco-based company now offers business loans, peer-to-peer payment options, debit cards, and more.
SQ’s P2P payment platform, the Cash App, boasted more than 15 million monthly active users at the end of December 2018, which doubled the year-ago quarter’s total. The Cash App helps Square stands out against rivals like JP Morgan JPM and PayPal’s Venmo. Meanwhile, Square’s back-end, in-app payment infrastructure offerings could become more important as some estimates suggest that mobile will account for almost half of all digital retail sales by 2020.
On top of that, the firm’s hardware business skyrocketed 51% last quarter, fueled by new Square Terminal. Going forward, Square is set to roll out more financial service offerings in an effort to further challenge the traditional banking and credit card industries. Even Apple AAPL has bet on the future of fintech in an effort to monetize its massive install base as iPhone sales slow.
As we mentioned at the top, shares of SQ have climbed 30% this year. Yet, thanks to its massive late-2018 selloff, alongside much of the market, Square stock rests roughly 28% below its 52-week intraday high of $101.15 per share. This gives the stock plenty of room to run if Square is able to impress Wall Street Wednesday. Plus, investors will note just how strong SQ’s three-year run has been, easily crushing FAANG standout Netflix NFLX.
Q1 Outlook & Earnings Trends
Square is coming off a better-than-expected Q4 2018 that saw its gross payment volume, a widely tracked Wall Street metric, surge 28% to reach roughly $23 billion. Overall, the company’s quarterly revenue surged 51%, with fiscal 2018 revenue up 49%.
With this in mind, our current Zacks Consensus Estimate calls for Square’s first quarter fiscal 2019 revenue to jump roughly 41% to reach $942.62 million. This growth would come on top of the year-ago period’s 45% revenue growth.
More specifically, Square’s gross payment volume is projected to soar approximately 51% from $17.83 billion in Q1 2018 to reach $27.07 billion, based on our NFM estimates. Inventors should note that this would blow away last quarter’s 28% GPV growth and crush Q1 2018’s 31% expansion, which could signal Cash App’s strength and the continued rise of larger sellers.
At the bottom end of the income statement, SQ’s adjusted quarterly earnings are projected to surge 33.3% to hit $0.08 per share. On top of that, the company’s full-year EPS figure is projected to soar 57.5%. However, Square’s earnings estimate revision picture has trended more heavily in the wrong direction recently.
Despite its recent earnings estimate revision trends, the company’s Q1 consensus has remained the same over the last 60 days. Plus, the company has a solid history of quarterly earnings beats, which includes an average surprise of 16% over the trailing four periods.
Square is currently a Zack Ranks #3 (Hold) and investors might want to wait to see how Wall Street reacts to the company’s earnings report before they buy SQ stock. But in the end, Square is a growth stock within a larger growth industry that could be solid longer-term buy.
Square is scheduled to report its first quarter 2019 financial results after the closing bell on Wednesday, May 1. So, make sure to head back to Zacks for a complete break down of the firm’s actual quarterly metrics.
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