Stock to watch: Square Inc (NYSE: SQ)

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Square Inc (NYSE: SQ) stock is paring its gains on November 7th, 2019 (+5%), falling over 3% on November 8th, 2019 (as of 10:37:48; Source: Investing.com). The company posted mixed results for the third quarter of FY 19 after disposing an underperforming business unit. Overall, the company has posted third-quarter net income of $29 million, after reporting the net income of $20 million in the year-prior quarter. Gross payment volume grew to $28.2 billion from $22.5 billion and came just above the FactSet consensus, which called for $27.9 billion. Square disclosed that 55% of volume came from sellers doing more than $125,000 in annualized gross payment volume. These sellers had accounted for 54% of volume in the June quarter. The company’s top-line forecast is made more complicated due to Square’s sale of its Caviar food-delivery business in late October, but the management had raised its full-year outlook both including and excluding Caviar’s impact.

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SQ in the third quarter of FY 19 has reported the adjusted earnings per share of 25 cents, beating the analysts’ estimates for the adjusted earnings per share of 20 cents, according to analysts surveyed by FactSet. The company had reported the adjusted revenue growth of 40 percent to $431 million in the third quarter of FY 19, missing the analysts’ estimates for revenue of $597 million. In the third quarter of 2019, the seller ecosystem had generated $918 million of total net revenue, and $364 million of gross profit, which grew 27% and 26% year-over-year respectively.

Square now expects total net revenue for 2019 to be in the range of $4.560 million to $4.580 million , up from a prior forecast of $4.410 million to $4.470 million. Excluding Caviar, it expects to be in the range of $4.415 million to $4.435 million, compared to an earlier forecast of $4.220 million to $4.280 million. However, SQ projects 19 cents to 21 cents in adjusted earnings per share while the FactSet consensus was for 25 cents.

In 2020, the company expects adjusted EBITDA margins to be roughly flat compared to the 18% adjusted EBITDA margins implied by the updated 2019 guidance. The company  plans to reinvest the entirety of the 2 points of EBITDA margin unlocked by the sale of Caviar. A key investment area in 2020 will include the sales and marketing spend into the seller ecosystem.  The company plans to expand Oakland office, as well as additional regional expansion in fiscal 2020.

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