On Wednesday after the market closes, Square (NYSE:SQ) will announce its third-quarter results — and it will certainly be an important report. After all, the SQ stock has been in the bear mode lately, dragged down by the rest of the tech sector.
Since late September, Square stock has gone from $100 to $73. Although, the performance for the year has still been standout. Note that the year-to-date return for SQ is 124%.
OK then, let’s take a look at the projections for SQ earnings. According to the company’s own projections, Q3 revenues are expected to range from $407 to $412 million while adjusted earnings are forecast to come in at 8 cents to 10 cents a share. As for the Street consensus, the revenues are expected to reach $413.67 and earnings to be 11 cents.
Q3 was also active for Square. Here are just some of the notable events:
- The company announced Square Terminal, which is an all-in-one card processing device. This is part of a strategy to snag larger merchants, which usually want something more than hardware that needs to be plugged into an Apple (NASDAQ:AAPL) or Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) device. The Square Terminal has a battery that lasts all day and includes Wi-Fi or Ethernet connections.
- Square announced Installments, which allows sellers to spread payments over time (from 3 to 12 months). This has usually been something available for larger businesses. Installments can be setup in minutes and has no sales volume minimums. More importantly, this approach will help SQ customers land even more sales.
- The company announced the Square Solutions Partner Program, which connects sellers with partners who can build new systems on the Square platform. Keep in mind that many merchants need to develop custom software because of the unique needs of their businesses.
- The company rolled out the Square Reader SDK (Software Development Kit), which allows third parties to create such things as self-ordering kiosks, mobile points of sale and in-store line-busting apps. Not only can these solutions be deployed across mobile devices but even CRM (Customer Relationship Management) and ERP (Enterprise Resource Planning) systems.
However, as for the impact on SQ stock, the biggest piece of news was the unexpected departure of CFO Sarah Friar. She plans to take the CEO post at Nextdoor, which is a social networking startup. On the news, SQ stock dropped over 10%.
There is no replacement yet. And given the difficulties of finding top-notch talent — especially someone who has public company experience — the search is likely to take a while.
Friar joined Square in 2012 and was key in managing various financings as well as the public offering. She led the charge in entering new markets, such as lending.
Bottom Line for SQ Stock
Fintech represents a major growth opportunity and SQ stock is a pretty good way to play the trend. Let’s face it, the company has been an innovation machine. And some of the offerings look like breakout apps, such as the Cash App and Cash Card.
Now the valuation on SQ stock is far from cheap, with the forward price-to-earnings ratio at about 99x. But then again, a premium is deserved for the company’s leadership and multiple drivers. And besides, with the latest drop off in the stock price, this could be a decent entry point — as it looks like the growth path will remain durable.
Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.