Square's Profit Forecast Misses Estimates on Increased Spending

(Bloomberg) -- Square Inc. gave a profit forecast for the current quarter that missed analysts’ estimates, hampered by a jump in spending on newer services beyond its main payments-processing business, including its fast-growing peer-to-peer cash-transfer app. The shares slipped in late trading.

Key Insights

  • Square said earnings excluding certain items will be 6 cents to 8 cents a share in the first quarter, on adjusted revenue of $472 million to $482 million. Analysts polled by Bloomberg on average had projected profit of 11 cents a share on sales of $475.9 million.
  • Earnings before interest, taxes, depreciation and amortization will be $47 million to $51 million, Square said. Analysts estimated $70.4 million.
  • Adjusted revenue rose 64 percent to $464.2 million in the fourth quarter, the San Francisco-based company said Wednesday in a statement. That topped the average estimate of $454.6 million, according to data compiled by Bloomberg. Profit, excluding certain items, was 14 cents a share, matching analysts’ predictions.
  • In addition to targeting larger companies, Square has tried to reach online-only firms. It recently rolled out a feature that allows developers and sellers to process payments within mobile apps, deepening its competition with rivals Stripe Inc. and PayPal Holdings Inc.
  • Square reported more than 15 million monthly active customers on its peer-to-peer money transfer application, called Cash App, in December. That was more than double a year earlier.

Market Reaction

  • Shares fell about 4.5 percent in extended trading after closing at $79.32 in New York. The stock has gained more than 40 percent so far this year.

Know More

  • This is the first quarterly report with Square’s new chief financial officer, former Activision Blizzard Inc. executive Amrita Ahuja. She replaced Sarah Friar, who was seen as pivotal to the company’s stability and expansion beyond payments.
  • Once mainly known for helping small brick-and-mortar shops accept credit cards, the company co-founded by Chief Executive Officer Jack Dorsey has morphed into a broader provider that helps businesses with payroll, loans, accounting, inventory tracking, website building, and more.
  • Gross payments volume rose 28 percent to $23 billion in the fourth quarter.

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