Square Shares Drop After Weaker Than Expected Guidance

Shares of Square were falling on Wednesday after the company behind the peer to peer Cash app reported fourth quarter earnings and guidance for the first quarter.

Fourth quarter results beat expectations but first quarter guidance was weaker than expected. Shares of the company fell as much as 7% in after-hours trading.

For the fourth quarter, the company reported earnings per share of 14 cents compared to 13 cents expected according to a forecast by Refinitiv.

Adjusted revenue was $464 million compared to $454 million that was expected. Revenue was a 64% increase year over year.

Square issued earnings-per-share guidance for the first quarter between 6 cents and 8 cents compared to 11 cents that analysts were expecting. Revenue expectations for the first quarter was in line with expectations.

Subscription- and services-based revenue was $194 million, representing a 144 percent jump year over year. For the full year the company reported $592 million in this arena, up 134 percent year over year.

The San Francisco-based company’s Cash App had over 15 million monthly active customers in December 2018. This is double compared to a year ago.
“People are utilizing the money they have in Cash App with friends, families and landlords, causing another download, and another, into the network,” said CEO Jack Dorsey.

“Square Card has been another highlight over the past three months,” Dorsey has also said. “This is a way for us to continue to serve underserved and unbanked sellers.”

“For the year ahead we continue to focus on three things and we will continue to strengthen our omni-channel offering,” Dorsey added. “That means that we add strength to in-person payments, to mobile payments and also to online. We’re really excited about everything we’re doing in financial services.”

“While 4Q was not something to write home about, the SQ story is likely far from over as new products and services can provide a second wind to growth as the year progresses,” Nomura Instinet analyst Dan Dolev remarked. “We expect a negative stock reaction given somewhat underwhelming results.”

Disclaimer: We have no position in Square Inc. (NYSE: SQ) and have not been compensated for this article.