E-commerce is the hot trend in payments right now, but so far Square Inc. has managed to thrive while primarily serving traditional brick-and-mortar businesses. A newly announced acquisition seeks to expand that reach, and it will be a key focus for Square when the company reports earnings Wednesday afternoon.
Square said last week that it would be purchasing Weebly, a website-creation platform, as it aims to provide a broader suite of services to customers. “Omnichannel is our top priority this year,” Alyssa Henry, Square’s seller lead, said on a call[1] with reporters.
The company enabled some e-commerce functions before, but they were mainly through partnerships. The idea behind Square’s $365 million acquisition[2] of Weebly is that mom-and-pop shops may now be more inclined to open online stores, while current Weebly customers might consider using Square for payment processing in their physical stores.
Don’t miss: Square says Weebly acquisition addresses its ‘top priority’[3]
“Overreliance on brick-and-mortar customers has been a common (and fair) criticism of Square, as adversaries argue that Square could be ‘on the wrong side of change,’ especially when compared with more e-commerce-driven competitors like Shopify,” wrote Instinet analyst Dan Dolev, who rates the stock a buy with a Street-high $65 target. “We view the acquisition of Weebly as a major step forward to becoming a fully integrated omnichannel commerce provider.”
KeyBanc Capital Markets analyst Josh Beck told MarketWatch that he thinks the deal makes strategic sense, but he’ll be looking for answers on Square’s earnings call about how the company plans to make use of Weebly. He said the company could use Weebly primarily as an e-commerce platform or to build out other software applications. He rates Square’s stock at overweight with a $55 target price.
Credit Suisse analyst Paul Condra also wants more details on the acquisition. “We would prefer to have more details about the underlying growth and revenue profile of Weebly before getting too bullish on this news,” wrote Condra, who has a neutral rating and $44 price target on the stock.
What to expect:
Earnings: Analysts surveyed by FactSet expect that the company will post an adjusted per-share loss of 5 cents for the March quarter, in line with a year earlier. According to Estimize, which crowdsources projections from hedge funds, academics and others, the average estimate calls for 7 cents a share in adjusted earnings.
Revenue: Analysts polled by FactSet estimate $620.8 million in total revenue, while those on Estimize on average predict total revenue of $630 million. Square posted $461.6 million in revenue a year ago. The company has beaten estimates on this metric for every quarter that it has been public.
FactSet’s consensus estimates project that Square generated $293 million in adjusted revenue for the March period, up from $204 million a year earlier. (Adjusted revenue removes transaction-based...