Why Square Shares Plunged Today

Gross payment volumes and guidance for the second quarter came in short.

Evan Niu
Evan Niu, CFA
May 2, 2019 at 3:54PM
Technology and Telecom

What happened

Shares of mobile payment processor Square (NYSE:SQ) have plunged today, down by 8% as of 3:30 p.m. EDT, after the company reported first-quarter earnings results. Payment volumes and second-quarter guidance left investors unimpressed.

So what

Revenue in the first quarter rose 43% to $959.4 million, ahead of the $942.6 million that analysts were modeling for. Gross payment volume (GPV) grew 27% to $22.6 billion, missing the consensus estimate of $22.8 billion in GPV. That all led to non-GAAP earnings per share of $0.11, compared to the $0.08 per share in adjusted profit that the market was expecting.

Person using Square Cash App on a phone

Square Cash App. Image source: Square.

On a GAAP basis, Square lost $38 million, or $0.09 per share. That loss included $14 million in red ink associated with a mark-to-market valuation of Square's investment in Eventbrite, which went public last year.


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Now what

Square's outlook was mixed. Investors were disappointed with the company's forecast for the second quarter, despite the fact that Square raised its full-year 2019 guidance.

For the second quarter, adjusted revenue is expected to be $545 million to $555 million, which should translate into adjusted EBITDA of $90 million to $94 million and adjusted earnings per share of $0.14 to $0.16. Consensus estimates were calling for $557 million in sales and $0.18 per share in adjusted profits.

Looking further out, Square is raising its full-year forecast and now expects adjusted revenue of $2.25 billion to $2.28 billion, up modestly from its prior outlook of $2.22 billion to $2.25 billion. CFO Amrita Ahuja noted, "The [guidance] increase was primarily driven by outperformance in Cash App as well as continued strength across our seller business."