Square Surges as Earnings Show CEO Isn't Distracted by Twitter Role

The following article, originally published at 5:52 p.m. on Tuesday, November 1, was updated with comments from analysts and executives.

Investors anxious about whether Jack Dorsey's return to the top job at Twitter (TWTR)  was hindering his work as CEO of payment-processor Square (SQ) had some of their worries allayed by the firm's quarterly earnings report.

The San Francisco-based finance business reported a loss of 9 cents a share for the three months through September, smaller than the 11-cent loss estimated by analysts in a FactSet survey, while payment volume climbed 39%. The company is still working to end its agreement with premium coffee chain Starbucks, which was initially touted as a positive but proved unprofitable and has taken longer to dissolve than anticipated.

Shares of the payment company climbed almost 4.8% to $11.60 on Wednesday, curbing the year-to-date loss of 11%. The broader S&P 500 rose in the same period.

Dorsey, who has been criticized for attempting to lead both Twitter and Square simultaneously, told CNBC last month that the businesses of both companies --- communications and commerce -- are "foundational" and he has no problem moving between his roles.

Society has complicated the two industries, and "our goal is to make it a whole lot easier," he said. "I don't really consider it a shift."

Square's revenue excluding Starbucks (SBUX)  climbed 51% to $178 million, higher than projections of $172.6 million, as hardware and software sales buoyed strong income from payment processing. 

On a net basis, including the costs of its Starbucks deal, Square reported a loss of $32.3 million. The coffee chain's impact on sales in the remainder of the year should be "nominal," Square said.

Keefe, Bruyette & Woods analyst Steven Kwok maintained a market perform rating on the stock, the equivalent of a neutral, noting that investors' "high expectations" are already reflected in the stock price.

"If the company is able to execute on delivering new products to the market and expanding globally, there could be further upside to revenue growth in the future," Kwok said in a note to clients.

Gross payment volume of $13.2 billion in the third quarter was bolstered by a 55% increase in "continued momentum" from larger sellers, who now make up 43% of the total, the company said. 

Such businesses -- like Vosges Haut-Chocolat, which has six stores -- represent an important market for Square. Recognizing their "more complex needs," the payments firm has "made changes to our website onboarding process to allow sellers to self-identify their sales volume, industry, and other characteristics," executives wrote to shareholders.  

Sophie Gatins, marketing manager for the chocolatier, said Square has given her company more flexibility while making it easier to track supplies.

EXCLUSIVE LOOK INSIDE: Starbucks is a holding in Jim Cramer's Action Alerts PLUS charitable trust portfolio. Want to be alerted before he buys or sells the stock? Learn more now.

If you liked this article you might like

7 Essential Rules for Investing in Tech Stocks

Hoping for Negative Seasonality, but Market's Not Holding Its Breadth

Apple Pay Cash's Coming Launch Will Give Paypal's Venmo Some Real Competition

Strong Action in Individual Stocks Starts to Feel a Bit Frothy

Fight Off Complacency: Cramer's 'Mad Money' Recap (Fri 9/15/17)