Square Earnings Could Cause 'Confusion' On Print, JPMorgan Warns

J.P. Morgan’s T. Huang provided an earnings preview for Square Inc SQ for the first quarter as a publicly traded company. The company is scheduled to report its 4Q15 results on March 9.

Items To Watch For

Huang mentioned that the key items to watch for would include “(1) adjusted revenue (JPMe $119M, up 45% yoy), (2) gross payment volume growth (JPMe +40%) and (3) software & data revenue (JPMe $16M, up 168% yoy), and related commentary on attach rates, notably cash advance.”

The analyst also mentioned, however, that there could be some initial confusion associated with the results announcement, given that the consensus revenue expectations reflect GAAP figures that include revenue and pass-through interchange and network fees associated with Starbucks Corporation SBUX

Expectations Too High?

Huang also cautioned that expectations appeared to be high, with the stock appreciating 41 percent over the past one month, 30 percent above the IPO price. This means that Square Inc. would need to report sufficient adjusted revenue and volume upside for expectations to be raised and the momentum to be sustained.

In addition, the analyst mentioned that The Wall Street Journal expressed caution ahead of the earnings report, while adding that the WSJ “doesn’t have any incremental information but it warns investors to temper expectations ahead of earnings Wed night and calls valuation expensive.”