Shares of Square (NYSE:SQ) continued their impressive momentum on Tuesday, hitting a new 52-week high of $21.63 in morning trading hours. After an impressive earnings report a few weeks back, this mobile payments giant has been on an unstoppable roll. But will the stock break into a new range, or did investors already miss their prime buying opportunity?
Recent Earnings Performance
Less than three weeks ago, Square reported a narrower-than-expected first-quarter loss, with revenues coming in above our consensus estimates as well (also read: Square Q1 Loss Narrower than Expected, Revenues Beat).
Adjusted loss per share came in at 3 cents, beating the Zacks Consensus Estimate of a loss of 17 cents per share. Revenues came in at $461.6 million, surpassing our consensus estimate of $450.7 million.
Revenue was up 2.1% sequentially and 21.7% year-over-year. Transaction-based revenue of $403.5 million was up 34.4% from the year-ago quarter. Subscription and services revenue was up 21.1% to $49.1 million.
Non-GAAP gross margin was 38%, up 61 basis points sequentially and 815 basis point year-over-year. Operating expenses were up 4.1% to $180 million.
Square recently launched in the United Kingdom, marking its fifth market for current operations. The company’s services are also available in the U.S., Australia, Canada, and Japan. The U.K. seems like a smart growth area for Square, as there should be plenty of small and mid-sized businesses to target.
Furthermore, Square continues to add Invoices sellers, reaping benefits from the integration of Invoices into the Square app. Square has also been steadily improving its industry-specific solutions, and its Caviar platform recently debuted a new food pickup service.
Estimate Revisions
Square also reported solid guidance, which has caused analysts to start raising their earnings estimates for the upcoming quarters. Within the past month, we’ve seen six positive revisions for Square’s current-quarter and next-quarter earnings. We’ve also seen seven positive revisions for its full-year and next-year earnings. In fact, our current Zacks Consensus Estimates show that Square could be turning an annual profit by the end of its next fiscal year.
Style Scores
Overall, Square has a “B” in our VGM category. This grade is being supported by its “A” grades for Growth and Momentum. Our consensus estimates call for strong growth in the near term and long term, and as the stock has gained over 17% in a month, the momentum grade makes sense too.
Square’s weakest Style Score is its “F” for Value. In most cases, value-minded investors are not too interested in these loss-making companies with potential.
Can It Move Higher?
A breakout will certainly occur if Square can post better-than-expected earnings and sales results again. However, the company does not report again until early August. Until then, it could meet some resistance at the top of this range, but it would take a significant change to its fundamental picture to send the stock tumbling too far.
We remain in a strong bull market, and it’s been taking a lot of trouble for investors to punish stocks. Keep an eye on breaking news, including new strategic initiatives or service expansions, as these could also send the stock higher.
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Square, Inc. (SQ): Free Stock Analysis Report
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