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Alberto Abaterusso
Alberto Abaterusso
Articles (1759) 

2 Notable Large Caps Deliver 3rd-Quarter Numbers

Square Inc., Roku Inc. beat analysts expectations on earnings and revenue

November 07, 2019 | About:

After market close on Wednesday, Square, Inc. (NYSE:SQ) and Roku, Inc. (NASDAQ:ROKU) issued their third-quarter results.

Square Inc.

Shares of the San Francisco-based payment and point-of-sale solutions provider in the U.S. and internationally rose by 1.3% to a price of $62.14 in after-hours trading. The company posted GAAP earnings of 6 cents per share on $602.22 million in adjusted revenue. Third-quarter adjusted revenue topped projections by $5.37 million. GAAP earnings per share increased 50% year over year and adjusted revenue grew by nearly 40%.

Moreover, Square reported the following year over year changes: the gross profit grew 42% to $500 million, the net income rose 45% to $29 million, the Gross Payment Volume climbed 25% to $28.2 billion and the adjusted Earnings Before Interest, Taxes, Depreciation and Amortization increased 85% to $131 million.

Square’s Seller ecosystem, which provides sellers with several software and hardware solutions to get payments wherever they do business, reached such a strong profitability that it encouraged the company to increase investments in growth-oriented strategies.

Additionally, Square’s Cash App ecosystem, which offers customers a comprehensive range of products to easily send payments, spend, save money and invest cash in shares of stocks, reached $307 million in total net revenue in the third quarter of 2019. Excluding bitcoin, revenue from the Cash App ecosystem rose 115% year over year to $159 million.

For the final quarter of 2019, Square targets adjusted earnings per share in the 19 cents to 21 cents range on adjusted revenue of $585 million to $595 million versus analyst estimates of 25 cents for adjusted earnings on projected adjusted revenue of $621.24 million.

For the full year of 2019, Square expects that adjusted earnings per share will fall in the 76 cents – 78 cents range on adjusted revenue of $2.24 billion to $2.25 billion, which is slightly below the previous guidance range of $2.25 billion to $2.28 billion. Forecasters see Square Inc. closing full year 2019 with an adjusted revenue of $2.27 billion.

Year to date, the share price has risen 9% to $61.34 at close on Wednesday for a market capitalization of $26.2 billion.

The share price is below the 120-, 70- and 30-day simple moving average lines.

The 52-week range is $49.82 to $83.2.

Square Inc does not pay a dividend.

Wall Street issued an overweight recommendation rating and has established an average target price of $74.03, a 20.7% upside from Wednesday’s closing price.

Roku Inc.

Shares of the Los Gatos, California-based TV streaming platform operator tumbled by 14.99% to a price of $119.90 in after-hours. Although Roku beat analyst expectations on revenue by $3.31 million and on GAAP earnings by 4 cents, the company reported a loss of 22 cents per share.

The top line of the income statement for the third quarter of 2019 grew 50.5% year over year to $260.9 million. In contrast, the bottom line got worse from the year-ago third-quarter loss of 9 cents per share, which may have created the pressure causing the sharp drop during extended trading.

By segment, revenue from Platform was $179.3 million (up 79% year over year) and revenue from Player was $81.6 million (up 11% year over year).

Roku recorded the following year over year changes in key operating metrics and other financial measures: the number of active accounts rose 36% to 32.3 million and the number of Streaming hours increased 68% to 10.3 billion. The trailing 12-month revenue per user averaged $22.58 in the third quarter of 2019 compared to $17.34 in the third quarter of 2019, while the gross profit was $118.5 million compared to $79 million.

For the final quarter of 2019, Roku expects that revenue will be between $380 million and $396 million and that total gross profit will range between $156 million and $161 million. The company also forecasts that net income will again result in a loss of $22 million to $17 million and adjusted Earnings Before Interest, Taxes, Depreciation and Amortization will fluctuate in the $7 million - $12 million range.

For the full year of 2019, Roku sees revenue growing by 48%-50% to $1.098 billion to $1.113 billion versus analyst projects of $1.1 billion. Total revenue was $742.51 million in full-year 2018. The company also anticipates total gross profit in the $489 million – $494 million range, net loss of $66 million to $61 million, and an adjusted EBITDA of $28 million to $33 million.

The stock price climbed 360% so far this year to above the 120-, 70- and 30-day simple moving average lines, closing at $141.05 per share on Wednesday for a market capitalization of $16.39 billion.

The 52-week range is $26.3 to $176.55.

Roku does not pay a dividend.

Wall Street issued an overweight recommendation rating and has set an average target price of $137.80, a 2.3% downside from Wednesday’s closing price.

Disclosure: I have no positions in any security mentioned.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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