Mobile payments are expected to grow at an annual rate of 28% from this year through 2023, and that expansion is only helping payment and point of sale provider Square (SQ), asserts Mike Cintolo, growth stock expert and editor of Cabot Top Ten Trader.
The company just reported EPS of $0.23 per share for its fourth quarter, two cents higher than analysts had forecast, higher than the company’s $0.19-$0.21 per share estimate and up a strong 63% from a year ago. Revenues also surpassed estimates, rising 41%, to $1.31 billion.
The biggest revenue component, at $938 million, was Square’s Seller ecosystem that targets small- and medium-sized businesses (though is increasingly making headway into larger clientele). But coming up as a huge contributor to the top and bottom lines is its second ecosystem, its Cash App.
The app contributed $361 million to revenues, an increase of 147% from a year ago, and saw users grow a whopping 60% to 24 million.
Subscription services grew 45% and the company’s lending arm, Square Capital, saw revenues rise 42% as it leant out more short-term cash (and cash advances) to merchants. Wall Street liked the earnings report, but loved Square’s guidance even more.
The company is forecasting first quarter revenues of around $1.35 billion (higher than the prior consensus estimate of $1.20 billion) and EPS of 17 cents per share, higher than analysts’ estimate of $0.14.
For the year, Square expects revenues north of $5.9 billion and EPS of $0.90 to $0.94. Square has always had a great story, and the Cash App could be the “new” catalyst that brings it into favor once again.
SQ had a monster run for a couple of years starting in mid 2016, but topped with the market in the fall of 2018, fell apart and fell out of favor — as of the end of last year, it was still sitting around 40% off its all-time high.
But we really like the action this year, with SQ up seven weeks in a row and finding big-volume support after earnings last week. It’s swinging around wildly, but we’re OK taking a (small) stab at it here, or just keeping it on your watch list.
