Shares of fintech giant Square (SQ 3.25%) had fallen by more than 4% as of 11:27 a.m. EDT Friday after an analyst at Jefferies said they expect the company to miss earnings estimates in its upcoming quarterly report.
Analysts on average are expecting to hear Square report third-quarter earnings of $0.39 per share on total revenue of $4.57 billion. There is, however, a pretty wide range among the individual predictions, with a low estimate of just $0.02 per share and a high estimate of $0.63 per share.
When companies report earnings below the consensus estimate, their shares often decline in the short term, although post-report price moves are also dependent on lots of other factors including management's guidance and overall outlook.
Further, while Jefferies expects Square to miss on earnings, the company also initiated coverage on Square earlier this month with a $300 price target. Shares were trading late Friday morning in the neighborhood of $254.30, so that target implies significant upside.
Square has been growing at an extremely fast clip and expectations are clearly sky high. And given that it's not entirely clear how the pandemic's Delta variant surge may have shaken things up for the company in the third quarter, it's possible that it will miss earnings estimates.
But if you believe in what Square is building with its payments app and its ecosystem of products and services for merchants, then it should be easy to see that the long-term outlook for the company remains extremely positive.