Square’s earnings expectations have gotten slashed, but the mobile-payments company still has a high bar to clear

Twitter chief executive officer Jack Dorsey testifies during a House Committee on Energy and Commerce hearing about Twitter's transparency and accountability, on Capitol Hill, September 5, 2018 in Washington, DC.

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Twitter chief executive officer Jack Dorsey testifies during a House Committee on Energy and Commerce hearing about Twitter’s transparency and accountability, on Capitol Hill, September 5, 2018 in Washington, DC.
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Drew Angerer/Getty Images

  • Square is set to report first-quarter earnings after the bell on Wednesday.
  • While expectations for its results have come down, the bar to impress investors is still sky-high.
  • That’s because the mobile payments company’s guidance last quarter disappointed investors and sent shares tumbling, prompting analysts to trim expectations.
  • Watch Square trade live.

Square is in a delicate place.

The Jack Dorsey-led mobile payments company is set to release first-quarter earnings after the bell on Wednesday. Analysts have pared down their expectations for those results by about $0.04 a share in recent months after poor guidance sent shares tumbling in February.

At the same time, Square has to dazzle investors on several fronts – like sales and EBITDA – to justify its pricey valuation of more than 100 times forward earnings.

“SQ has exceeded Street revenue and EBITDA estimates by an average of $15M and $3M, respectively, the past four quarters,” JPMorgan analysts led by Tien-tsin Huang wrote in a note to clients on April 23. “We see this momentum continuing in 1Q, which is required for SQ to maintain its premium valuation.”

Still, the analysts trimmed their 2019 and 2020 earnings expectations.

Here’s what Wall Street analysts surveyed by Bloomberg are expecting.

  • Revenue: $479.26 million
  • Adjusted earnings per share: $0.08

“We expect full year revenue guidance could move up, but see EBITDA holding firm recognizing now is the time for Square to invest in consumer/card initiatives; hence we are front loading more expenses for the year,” the JPMorgan analysts wrote.

“With lots of energy and competition for on-demand banking services like Cash App, we expect investments to drive habitual usage (e.g. Boost) to stay elevated.”

Read an excerpt of Business Insider Intelligence’s Payments Briefing: Square is making a slew of updates across its product offering

In a mid-April note to investors, SunTrust analysts led by Andrew Jeffrey said that while the Square is the “most dynamic and disruptive name we follow,” its high valuation has everything priced in.

As such, the analysts trimmed their revenue and EBITDA expectations for this year and next.

More broadly, Wall Street analysts are nearly split between bullish and neutral. Of the analysts polled by Bloomberg, 18 rate the stock a “buy,” 16 recommend “hold,” and four say “sell.”

Square shares have jumped 32% this year, but remain 26% below their all-time high of $101.15 set in October.

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Square shares.

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Square shares.
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Markets Insider