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Why Is Square (SQ) Down 0.2% Since Last Earnings Report?

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It has been about a month since the last earnings report for Square (SQ). Shares have lost about 0.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Square due for a breakout? 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 catalysts.

Square Reports Q2 Earnings

Square reported second-quarter 2021 adjusted earnings of 66 cents per share, beating the Zacks Consensus Estimate by 106.3%. Further, the figure rose 266.7% year over year and 60.9% sequentially.

Net revenues of $4.68 billion improved 143% from the prior-year quarter.

However, the figure declined 7.4% from the previous quarter and missed the Zacks Consensus Estimate of $5.02 billion.

Year-over-year revenue growth was driven by strong momentum across the Cash App ecosystem, which contributed $3.33 billion to net revenues in the reported quarter, up 177% year over year.

Solid momentum across bitcoin was the key catalyst. Without bitcoin revenues, net revenues would amount to $1.96 billion, up 87% year over year.

Strong growth in transaction, subscription and hardware revenues contributed well to the results.

Square witnessed solid traction across the seller ecosystem, which generated $1.31 billion of revenues, up 81% year over year. Accelerating gross payment volume (GPV) drove the results.

However, uncertainties related to the pandemic remain concerning.

Nevertheless, the company’s strengthening momentum across online channels, sellers and the Cash App is expected to act as tailwinds in the days ahead.

Gross Payment Volume

GPV in the second quarter amounted to $42.8 billion, up 88% from the year-ago quarter. This was driven by strength across the seller ecosystem. Notably, seller GPV accounted for 90% of the total GPV in the second quarter. Seller GPV was up 86% year over year.

The robust performance of the Cash App, which accounted for $4.1 billion of the overall GPV (10%), remained a positive. The figure increased 107% year over year.

The card-not-present GPV witnessed year-over-year growth of 41% in the second quarter. Robust online channels, including Square Online, Invoices, Virtual Terminal and eCommerce API, contributed to the upside.

Square experienced a strong recovery in its card-present volumes in the reported quarter, owing to rising consumer spending and regional reopenings. Card-present GPV was up 128% from the year-ago quarter.

Top-Line Details

Transaction (26.3% of net revenues): The company generated transaction revenues of $1.23 billion, up 80% year over year. Strong seller ecosystem accounted for $1.12 billion of transaction revenues, up 78% year over year. The robust performance of the Cash App contributed $111 million to transaction revenues, up 107% year over year, owing to the rising number of transactions as well as business accounts.

Subscription and services (14.6% of revenues): The company generated $685.2 million in revenues from the category, surging 98% from the year-ago quarter. The improvement can be attributed to a strong performance by the Cash App, which contributed $495 million to the category’s top line. The figure was up 83% from the year-ago quarter. Seller ecosystem contributed $151 million to subscription and services revenues, up 101% year over year. Positive contributions from the TIDAL acquisition benefited the top line forthis category.

Hardware (0.9% of revenues): Square generated revenues of $43.7 million from thebusiness, up 126% year over year. This was driven by strong unit sales of hardware devices like SquareRegister and Square Terminal.

Bitcoin (58.2% of revenues): The company generated revenues of $2.72 billion from thecategory, up significantly from $211.2 million. Square continued to benefit from the bitcoin space, driven by the increasing adoption of the Cash App. Rising bitcoin prices alongwith solid customer demand and increasing bitcoin actives were major positives.

Operating Details

Per management, gross profit grew 91% from the year-ago quarter to $1.14 billion. However, gross margin contracted 662 basis points (bps) year over year to 24.4%.

Adjusted EBITDA was $360 million in the reported quarter, up 268% year over year.

Operating expenses were$1.02 billion, jumping 64% from the prior-year quarter.

Product development expenses were $327 million, up 57% year over year primarily due to rising headcount and personnel costs in engineering, data science and design teams.

General and administrative expenses were $221 million, up 62% from the prior-year quarter. This was primarily caused by finance, legal, compliance and support personnel costs.

Sales and marketing costs were $375 million, up 58% year over year due to an increase in Cash App marketing expenses and a hike in advertising, personnel and other costs.

Balance Sheet

As of Jun 30, 2021, the cash and cash equivalent balance was $4.6 billion, up from $3.02 billion as of Mar 31, 2021.

Short-term investments were $1.01 billion in the reported quarter, up from $644.4million in the previous quarter.

Long-term debt was $4.8 billion, increasing from $2.9 billion in the previous quarter.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, Square has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Square has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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