Square's (SQ) Q4 Earnings To Gain From Portfolio Strength

Square, Inc. (NYSE:SQ) is set to report fourth-quarter 2018 results on Feb 27.

The company’s strong endeavors toward expansion of financial services offering is anticipated to be a catalyst on the back of increasing demand for payments processing and mobile-commerce services among small businesses worldwide.

Additionally, Square’s seller friendly ecosystem remains crucial to sellers or merchants. Notably, the ecosystem enables sellers to combine software, hardware and payments services in order to accept payment from the customers through its wide range of online payment products.

All these factors are likely to drive the Gross Payment Volume (“GPV”) in the to-be-reported quarter which happens to be the key metric for the company’s top-line growth.

GPV in the last reported quarter increased almost 29.3% year over year and 5.1% on a sequential basis to $22.49 billion, driven by growth in larger sellers. Moreover, GPV from larger sellers contributed 52% to total GPV and surged 41% year over year.

The Zacks Consensus Estimate for GPV for the fourth quarter is pegged at $22.97 billion.

Click here to know how the company’s overall fourth-quarter performance is likely to be.

Strong Portfolio to Aid Growth

Square’s expanding product portfolio on the back of strategic acquisitions remains positive.

The acquisition of Zesty, a catering platform, has strengthened the corporate ordering business of Caviar, Square’s food ordering platform.

Further, Zesty buyout is aiding the company in attracting more and more restaurants to its platform as it enables them to grab high-margin corporate orders. The acquisition in turn is aiding the company’s omni-channel business.

We believe both the buyouts are likely to contribute well to the to-be-reported quarter results.

Apart from positive contributions from acquisitions, the company’s strong product lines such as Square Register, Virtual Terminal, Instant Deposits, Cash Card, Caviar and API platforms are also performing well. In fact, these product lines are attracting new sellers as well as retaining the existing ones, which in turn are aiding the payment volume of Square.

Further, improving business loan processing via Square Capital is a tailwind. Additionally, growing adoption of Cash App in the bitcoin space remains positive for Square’s accelerating bitcoin revenues.

Further, Square Reader SDK that helps in building customized in-person checkout experiences for sellers and buyers will strengthen the company’s offerings.

During the fourth quarter, the company equipped Square Payroll with some useful employee benefits such as like health insurance, pre-tax spending, retirement savings and workers’ compensation, thus enabling small businesses to offer these benefits to their employees.

Square’s robust portfolio strength is expected to continue aiding fourth-quarter results.

Zacks Rank and Other Stocks to Consider

Square carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader technology sector are Akamai Technologies (NASDAQ:AKAM) , Five9 (NASDAQ:FIVN) and Harris Corporation (NYSE:HRS) . All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate for Akamai Technologies, Five9 and Harris Corporation is currently pegged at 14.67%, 10% and 8%, respectively.

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Akamai Technologies, Inc. (AKAM): Free Stock Analysis Report

Square, Inc. (SQ): Free Stock Analysis Report

Five9, Inc. (FIVN): Free Stock Analysis Report

Harris Corporation (HRS): Free Stock Analysis Report

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