Square, Inc.

 

 
SQ Details
 
3QFY19 Results to be Announced; Key Event to Watch Out for: Square, Inc. (NASDAQ: SQ) is a US-based company, which revolutionized payments and made it possible to accept card payments, using a smartphone or tablet. The company will release its financial results for the third quarter on November 6, 2019 after the market closes.
 
DoorDash to Acquire Square’s Food Ordering Platform: DoorDash announced that it has entered into a definitive agreement with Square to acquire Caviar for $410 million in cash and DoorDash preferred stock. DoorDash’s acquisition of Caviar creates a highly differentiated company with the unique brand and wide-ranging selection.
 
Highlights of Second Quarter Financial Metrics:SQ reported total net revenue amounting to US$1.17 billion, reflecting a rise of 44% on YoY basis. The company also launched orders API so that sellers can manage orders from all their channels within Square, and Cash App ecosystem has reached considerable scale, generating $260 million in total net revenue in the second quarter of 2019. Net loss of the company came in at $7 million in the second quarter as compared to a net loss of $6 million in the second quarter of FY 2018. The following picture gives an idea of the total net revenue of the company in Q2:


Total net revenue (Source: Company Reports)
 
During the quarter, bitcoin revenue benefited from increased volume as a result of an increase in the price of bitcoin and generated a gross profit of $2 million.In Q2, adjusted EBITDA and proceeds from the exercise of stock options contributed positively to the company’s cash balance. The company ended Q2 with $1.7 billion in cash, cash equivalents, restricted cash and investments in marketable fixed income securities, implying a rise of around $80 million as compared to Q1 FY 2019.
 
Future Prospects: The company anticipated that the total net revenue for the third quarter of 2019 would range between $1.13 billion to $1.15 billion whilst the adjusted revenue would fall between $590 million to $600 million. The company also expects that the adjusted EBITDA would be in the range of $106 million to $110 million. However, this guidance of the company doesn’t involve the impact from the sale of Caviar. In Q3 FY 2019, the company is anticipating adjusted EPS (diluted) in the ambit of $0.18-$0.20, while for FY 2019 the range is estimated at $0.74-$0.78.
 
Stock Recommendation: Gross margin of the company improved from 38.8% in Q2 FY 2018 to 39.7% in Q2 FY 2019. EBITDA margin also increased from 3.9% in Q2 FY 2018 to 4.4% in Q2 FY 2019. Debt to equity multiple dropped from 0.99x in Q2 FY 2018 to 0.78x in Q2 FY 2019. Current ratio of 1.49x in Q2 FY19 stood slightly higher than the industry median of 1.46x, which shows the company is capable of paying its short-term obligations. Currently, the stock is trading towards the lower end of its 52-week trading range of $49.82-$83.20. The company reported decent growth in net revenue in the second quarter of FY19, along with improved margins. The company will announce its 3QFY19 results on November 6, 2019 after the market closes. Contemplating the points mentioned above, we recommend a “Buy” rating on the stock at the current market price of US$58.83, down 3.79% on October 22, 2019.
 
 
SQ Daily Technical Chart (Source: Thomson Reuters)

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