BTIG says buy as Square rises after results
Shares of Square (SQ) are on the rise after the company reported better than expected fourth quarter results and guidance. Following the announcement, BTIG analyst Mark Palmer upgraded the stock to Buy, saying Square's results confirm an upturn in the trajectory of the company's profitable growth. RESULTS: Last night, Square reported fourth quarter losses per share of (4c), which was better than the expected (9c). The company also announced revenue of $451.9M for the quarter, above consensus estimates of $449.9M, and adjusted revenue of $192M, which represents an increase of 43% year over year. Square said it sees first quarter adjusted earnings per share between 0c-2c, much better than the expected losses per share of (10c), and revenue of $440M-$452M, with consensus at $451M. For the full year 2017, Square sees adjusted earnings per share of 15c-19c and revenue of $2.09B-$2.15B, with consensus at (31c) and $2.12B, respectively. UPTURN IN TRAJECTORY: BTIG's Palmer upgraded Square to Buy from Neutral, with a $20 price target, saying the company's fourth quarter results confirm an upturn in the trajectory of its profitable growth and a "fuller valuation is merited." The analyst noted that, during the quarter, Square posted emphatic outperformance in each of the categories that matter to investors, starting with $30M in adjusted EBITDA, up 150% sequentially and well ahead of the consensus estimate. Additionally, Palmer pointed out the importance of Square's Software and Data Products segment to the sustained growth of its profitability, as businesses such as Square Capital, Caviar and Instant Deposit feature higher margins and their revenues are more recurring in nature than those of its core payments business. The segment, which has been relabeled "subscription and services-based revenue," continued its "solid growth" in the fourth quarter, generating $41M in revenue, up 17% sequentially and 81% year over year, he pointed out. CRAIG-HALLUM REMAINS ON THE SIDELINES: Craig-Hallum analyst Bradley Berning raised his price target for Square to $15.50 from $9 following quarterly results. While the analyst acknowledged that the company's fourth quarter EBITDA and 2017 guidance were even stronger than his above consensus estimate, he continues to have longer term concerns about the sustainability of the credit model being built with high single digit gain on sale margins. Nonetheless, Berning told investors that he has no line of sight on timing when this may become an issue. PRICE ACTION: In later morning, shares of Square have jumped nearly 13% to $16.95.