Square, Inc. (SQ) shares moved sharply lower on Thursday after the payment processing company released its third quarter financial results. Revenue rose 59.3% to $489 million, beating consensus estimates by $9.37 million, and non-GAAP earnings per share (EPS) came in at 11 cents, beating consensus estimates by three cents per share.
While first quarter earnings were strong, weak second quarter guidance sent shares lower during the session. Second quarter EPS are projected to be between 14 cents and 16 cents, which is lower than the 18 cents per share that analysts were expecting. Management's adjusted revenue expectation of $545 million to $555 million was also lower than the $555.3 million that analysts were expecting to see.
Analysts were mixed following the earnings report. Guggenheim's Jeff Cantwell raised his price target on Square shares from $92.00 to $94.00, saying that he likes that the company increased its yearly forecast and notes that S&SB revenue keeps exceeding high expectations. However, SunTrust's Andrew Jeffrey lowered his price target from $75.00 to $65.00, saying that robust competition in new vertical markets will require Square to boost investment at the cost of margins.
From a technical standpoint, the stock broke down from its price channel and S1 support at $69.13 to near S2 support at $65.43. The relative strength index (RSI) fell to oversold levels at 34.11, but the moving average convergence divergence (MACD) continues to trend lower. These indicators suggest that the stock could see some consolidation, but the intermediate-term trend remains bearish.
Traders should watch for some consolidation between S1 and S2 support levels over the coming session. If the stock breaks back above S1 and trendline resistance, traders could see a move toward the pivot point at $73.48. If the stock breaks down from S2 support, the next major support level isn't until prior lows made last year near $50.00.
The author holds no position in the stock(s) mentioned except through passively managed index funds.