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Why Square, Inc. Stock Fell Thursday

By Daniel Sparks – Nov 8, 2018 at 2:27PM

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Square's 51% revenue growth and improved profitability weren't enough for the Street.

What happened

Shares of financial-technology company Square (SQ 2.29%) took a hit on Thursday, falling as much as 10.6%. As of 1:45 p.m. EST, the stock was down 10.2%.

Square's decline follows the company's third-quarter earnings release. Though revenue and earnings per share for the period were both above consensus analyst estimates, the company's outlook for its fourth-quarter profit was below expectations.

Square tablet stand and a contactless chip reader device on a cafe counter.

Image source: Square.

So what

Square reported third-quarter revenue of $882 million and adjusted revenue of $431 million. Net revenue was up 51% year over year, while adjusted revenue soared 68%. The company's net income for the quarter came in at $20 million, up from a loss of $6 million in the year-ago quarter.

But Square's forecast for adjusted earnings per share between $0.12 and $0.13 for its fourth quarter was below the $0.15 analysts were expecting. 

Now what

Square's strong momentum prompted management to raise its guidance for full-year revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Management now expects full-year revenue between $3.26 billion and $3.27 billion, up from a previous forecast of $3.19 billion to $3.22 billion. Management expects its 2018 adjusted EBITDA to be between $250 million and $255 million, up from a previous estimate of $240 million to $250 million.

Daniel Sparks owns shares of Square. The Motley Fool owns shares of and recommends Square. The Motley Fool has the following options: short January 2019 $80 calls on Square. The Motley Fool has a disclosure policy.

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