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Square's (SQ) Q2 Earnings to Gain From Portfolio Strength

Zacks Equity Research

Square, Inc. SQ is set to report second-quarter 2019 results on Aug 1.

The company’s endeavors toward strengthening financial services offering is a key catalyst and will aid upcoming quarterly results. Moreover, the company continues to ride on the back of increasing demand for payments processing and mobile-commerce services among small businesses worldwide, which in turn will aid the second-quarter results.

Additionally, Square’s friendly ecosystem plays a significant role in attracting sellers or merchants to its platform. Notably, the ecosystem enables sellers to combine software, hardware and payments services in order to accept payment from the customers through its wide range of online payment products.

We believe strengthening seller base remains crucial for the company and is likely to drive the Gross Payment Volume (GPV) in the to-be-reported quarter. Notably, GPV is primarily responsible for driving the company’s top line.

GPV in the last reported quarter improved almost 27% year over year to $22.59 billion, driven by growth in larger sellers. Moreover, GPV from larger sellers contributed 51% to total GPV and surged 37% year over year.

The Zacks Consensus Estimate for GPV for the fourth quarter is pegged at $26.8 billion.

Click here to know how the company’s overall second-quarter performance is likely to be.

Square, Inc. Revenue (TTM)

Square, Inc. Revenue (TTM)

Square, Inc. revenue-ttm | Square, Inc. Quote

Strong Portfolio to Aid Growth

Square’s robust product portfolio remains the key catalyst.

The company’s strong product lines such as Square Invoices, Square Terminal, Instant Deposits, Cash Card, Square Register, Caviar, Square Stand and API platforms are helping the company in attracting new sellers as well as retaining the existing ones. This in turn is expected to boost the payment volume of Square in the to-be-reported quarter.

Further, Square Reader SDK that helps in building customized in-person checkout experiences for sellers and buyers remains a major positive.

Moreover, integration of Square Online Store with Square for Retail helps the company in gaining traction across retail sellers, which in turn will aid the upcoming quarterly results.

Improving business loan processing via Square Capital is also a tailwind. Additionally, growing adoption of Cash App in the bitcoin space remains positive for Square’s accelerating bitcoin revenues.

Apart from the above-mentioned products, Square is also benefiting from its strategic buyouts, which have expanded its product portfolio. The acquisition of Zesty, a catering platform, has strengthened the corporate ordering business of Caviar, Square’s food ordering platform.

Further, Weebly buyout is aiding the company’s omni-channel business.

We note that positive contributions from these two acquisitions and Square’s portfolio strength are expected to drive the top line in the to-be-reported quarter.

Zacks Rank and Other Stocks to Consider

Square carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader technology sector are Rosetta Stone RST, Alteryx AYX and Asure Software ASUR. While Rosetta Stone and Alteryx sport a Zacks Rank #1 (Strong Buy), Asure Software carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Rosetta Stone, Alteryx and Asure Software is currently projected to be 12.5%, 13.7% and 23.67%, respectively.

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