Why Square, Inc. Stock Jumped 18.5% in February

What happened

Shares of Square Inc.  (NYSE: SQ  )  rose 18.5% in the month of February, according to data provided by S&P Global Market Intelligence, after the financial services and mobile payment company announced strong fourth-quarter 2016 results.

So what

Square's stock enjoyed nearly all of last month's gains in the days after the Feb. 22, 2017, announcement. In it, Square confirmed that quarterly revenue climbed 21% year over year, to $452 million -- above Wall Street's expectations for revenue of $449.8 million. Meanwhile, Square's gross payment volume skyrocketed 34% year over year, to $13.7 billion. 

On an adjusted basis -- which excludes revenue from Starbucks as the coffee giant is transitioning away from Square's infrastructure -- revenue climbed 43%, to $192 million in the key holiday quarter. That translated to adjusted net income of $20.8 million, or $0.05 per diluted share, up from an adjusted net loss of $12.5 million, or $0.05 per share in last year's fourth quarter.

Square chip reader

Image source: Square, Inc.

Square also lauded last quarter's release of Square for Retail, marking its first industry-specific point-of-sale solution. Square for Retail is fully integrated with the company's managed payments products, and is optimized to meet retailers' needs for a search-based user interface and fast barcode scanning. 

Keeping in mind Square only just held its IPO in November 2015, CEO Jack Dorsey elaborated, "We're really proud of our first year as a public company. We delivered value to our customers in a way that meaningfully grew Square's business to scale, increasing revenue and improving margins. We did this by staying true to our values and committed to our purpose of economic empowerment."

Now what

What's more, for the full year of 2017 Square expects adjusted revenue of $880 million to $900 million, the midpoint of which represents a healthy 30% year-over-year growth. On the bottom line, that should translate to adjusted earnings per diluted share of $0.15 to $0.19. Both ranges were well ahead of analysts' expectations.

But given Square's propensity for underpromising and overdelivering, it's hardly surprising to see speculation that this guidance could prove too conservative when all is said and done this year. In the end, as Square continues to lead the way in the burgeoning mobile payments space while expanding its reach with complementary platforms like Square for Retail, I won't be surprised if the stock has more room to run from here.

10 stocks we like better than Square
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Square wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 6, 2017

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 4006828, ~/Articles/ArticleHandler.aspx, 3/25/2017 1:45:24 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 4 hours ago Sponsored by:
Change down DOW 20596.7 -59.9 -0.3%
Change down S&P 500 2344.0 -2.0 -0.1%
Change up NASD 5828.7 11.0 0.2%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

3/24/2017 4:02 PM
SQ $16.59 Down -0.02 -0.12%
Square CAPS Rating: **