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Finance: Square slides after 4th-quarter earnings guidance whiffs (SQ)

  • Square reported third-quarter results after Wednesday's closing bell that beat on both the top and bottom lines.
  • Shares slid 6% in after-hours trading following the results. They had rallied as much as 7% Wednesday amid broad strength in the wake of the 2018 midterm elections.
  • Watch Square trade live.

Square, a mobile-payment provider, reported third-quarter results after Wednesday's closing bell that beat on both the top and bottom lines. But its fourth-quarter earnings guidance fell short, sending shares down 6%.

Here are the key numbers, compared to the Bloomberg consensus:

  • Adjusted earnings per share: $0.13 ($0.11 expected)
  • Revenue: $431 million ($414.1 million expected)
  • Q4 earnings guidance: $0.12 to $0.13 per share ($0.15 expected)
  • Full-year earnings guidance: $0.45 to $0.46 per share, up from $0.42 to $0.46 ($0.45 expected)

Square's stock jumped as much as 7% before the results, amid broad stock-market strength that came in the wake of the 2018 midterm elections shifting the balance of power in Washington. And while shares were strong on Wednesday, they had been under pressure as of late.

In October, Square fell by as much as 25% in the two days after CFO Sarah Friar unexpectedly announced her departure. Shares have recovered, but were still 17% below their September peak.

"As SQ has come back, our sense that previously frustrated shorts who had abandoned their positions have been re-emboldened, crowding negative positioning," Morgan Stanley analyst James Faucette said in a note sent out to clients on Tuesday.

"At the same time, we think a lot of institutions that own the name have let the stock run well past their respective internal price targets, and are hoping for one last squeeze before fading the position. All the ingredients for volatility are there, especially with a healthy mix of retail thrown into the mix."

Faucette has an "equal-weight" rating and $75 price target — 8% above where shares were currently trading.

Square was up 127% this year.

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