KBW Takes a Look at Mobile Payments Leader Square’s Third Quarter

November 13, 2019         By: jmongiello2

Earnings season shows up at odd times of the year sometimes, thanks to the vagaries of fiscal years and the like. Recently, Square brought out its own set of numbers, and our friends out at Keefe, Bruyette & Woods (KBW) dropped similar word about Square’s numbers. The news is mostly good, with a few minor hiccups along the way.

First, good news, and plenty of it. Square offered up an adjusted earnings per share (EPS) figure of $0.25, which beat estimates from both KBW and the Street itself, which was figuring $0.20 per share. Higher adjusted net revenues, lower cost of revenue, and higher income from other sources all lent a little extra fuel to Square’s fire, though a slightly higher tax rate took just a little wind out of the gains’ sails.

Third quarter results were considered “good” by KBW analysts, who found the stabilization in GPV growth something to crow about. However, here again there was a downside to the jubilation, as forward-looking commentary about a flat EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) margin set to appear in 2020 left some a bit concerned.

KBW, however, isn’t so concerned; the weaker than expected margin outlook is likely already baked in, with Square shares down from highs seen in late July. This should provide a good base for a rebound, and in part, led to a rating of Market Perform.

There’s no doubt that Square has its share of competitors in the space. The increased accessibility of mobile payment tools like Samsung Pay, Apple Pay and the rest have impinged on Square’s market space for some time now, and with more individual stores building their own systems, Square becomes more of a niche player. However, for all those firms out there that are still glad they can take credit cards from a simple plug-in dongle, Square might well have a lot of life-long friends out there to count on.

Mobile payments is an increasingly competitive market space, and Square is doing well to keep its head above water herein. Still, there’s room for improvement here, and Square may have its hands full keeping positive feeling going in the short term.