Shares of card-issuing fintech Marqeta (MQ -1.38%) plummeted 35.8% in November, according to data from S&P Global Market Intelligence.
It was a strange month for Marqeta to decline that much, since it reported earnings that handily beat analyst estimates and also raised guidance for the next quarter. Still, those strong numbers weren't enough to offset the widespread sell-off in high-multiple stocks toward the end of the month.
In the third quarter, Marqeta grew revenue 56%, ahead of analyst expectations. While net losses also widened 272% to $45.7 million, that bottom line also came in ahead of analyst estimates. Encouragingly, even though the company doesn't make net profits yet, gross margins expanded from 42% a year ago to 45%.
Marqeta also landed lots of new high-profile customers last quarter, which not only bodes well for its technology lead, but also diversifies its revenue away from its largest customer Square. Last quarter, Marqeta's share of revenue coming from Square fell from 72% to 68%.
Marqeta stock actually surged post-earnings, but then fell hard along with its fintech peers toward the end of the month. Fintech stocks have found themselves in a difficult position. Federal Reserve Chairman Jay Powell indicated the Federal Reserve board would consider tightening financial conditions at a quicker pace into next year, which opens the door to interest-rate increases. Interest-rate hikes could hurt high-multiple growth stocks, as they would lower the value of future earnings. Marqeta most certainly is that, as it currently generates no profits and trades at 23 times sales.
At the same time, the omicron variant also has the potential to lower consumer-spending power over the coming months, which could also hurt financially sensitive stocks like Marqeta. So high-multiple fintech stocks are getting it from both ends.
Marqeta is newly public, having had its IPO earlier this year back in June, and investors still don't know quite what to make of it. The stock has been incredibly volatile, falling 24% in September, rising 38% in October, and then falling another 36% in November.
Given its unique platform and ability to attract high-profile customers across the financial world, I'm bullish on Marqeta long term. However, investors should be prepared for severe volatility to both the upside and downside along the way.