Square Inc. Q3 2017 Earnings Results Sink Shares

The Square Q3 2017 earnings results were released after closing bell tonight, and the company posted adjusted earnings of 7 cents per share on $257 million in adjusted revenue and $585 million in total net revenue. Analysts had been looking for 5 cents per share in earnings on $244.6 million in adjusted revenue. In last year’s third quarter, Square reported adjusted earnings of 1 cent per share on $178 million in adjusted revenue and $439 million in total net revenue.

Square Q3 2017 earnings

Net losses narrowed to $16 million from the $32 million the company lost in last year’s third quarter. On a GAAP basis, Square Q3 2017 earnings report showed losses of 4 cents per share, versus the losses of 9 cents per share that were reported a year ago.

Adjusted EBITDA rose 195% year over year to $34 million from $12 million a year ago. Transaction-based revenue grew 31% to $510 million and was 2.93% of gross purchase volume. Subscription and services-based revenue rose 84% to $65 million. Square’s gross payment volume rose to $17.4 billion from $13.2 billion in the year-ago quarter. The StreetAccount consensus for gross payment volume stood at $17.03 billion.

KeyBanc analyst Josh Beck boosted his price target going into the Square Q3 2017 earnings release, raising it from $35 to $40 and reiterating his Overweight rating on Square stock. He sees gross payment volume as potentially the new most important metric for the company. He predicted a beat and raise quarter for Square with an expansion of 735 basis points in Square’s EBITDA margin, versus the 500 basis points that management guided for. He also predicted that management would call for “better than mid-single-digit margin expansion” early next year.

Square raises guidance

The company guided for $585 million to $595 million in net revenue and $262 million to $265 million in adjusted revenue for the fourth quarter. It expects $34 million to $37 million in adjusted EBITDA, net losses of 7 cents to 6 cents per share, and adjusted earnings of 5 cents to 6 cents per share for the quarter.