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Marqeta (NASDAQ:MQ) Reports Bullish Q3, Stock Jumps 13.7%


Adam Hejl /
2021/11/10 4:23 pm EST
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Leading edge card issuer Marqeta (NASDAQ: MQ) reported Q3 FY2021 results that beat analyst expectations, with revenue up 56% year on year to $131.5 million. Guidance for next quarter's revenue was surprisingly good, being $136.5 million at the midpoint, 8.51% above what analysts were expecting. Marqeta made a GAAP loss of $45.7 million, down on its loss of $12.3 million, in the same quarter last year.

Is now the time to buy Marqeta? Access our full analysis of the earnings results here, it's free.

Marqeta (MQ) Q3 FY2021 Highlights:

  • Revenue: $131.5 million vs analyst estimates of $119.2 million (10.3% beat)
  • EPS (GAAP): -$0.08
  • Revenue guidance for Q4 2021 is $136.5 million at the midpoint, above analyst estimates of $125.7 million
  • Free cash flow was negative $12.5 million, compared to negative free cash flow of $12.5 million in previous quarter
  • Gross Margin (GAAP): 44.9%, up from 41.8% same quarter last year

“Modern card issuing is at the heart of today’s digital economy, and our third quarter results put that on display, both with the growth we’re seeing, and the way our platform is bringing to life unique new payments use cases for an incredible array of innovators,” said Jason Gardner, Founder and CEO of Marqeta.

Founded by CEO Jason Gardner in 2009, Marqeta (NASDAQ: MQ) is an innovative card issuer that provides companies with the ability to issue and process virtual, physical, and tokenized credit and debit cards.

Consumers want the ability to make payments whenever and wherever they prefer – and to do so without having to worry about fraud or other security threats. However, building payments infrastructure from scratch is extremely resource-intensive for engineering teams. That drives demand for payments platforms that are easy to integrate and embed in consumer applications and websites.

Sales Growth

As you can see below, Marqeta's revenue growth has been incredible over the last year, growing from quarterly revenue of $84.3 million, to $131.5 million.

Marqeta Total Revenue

And while we saw even higher rates of growth previously, the revenue growth was still very strong; up a rather splendid 56% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $9.24 million in Q3, compared to $14.2 million in Q2 2021. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Analysts covering the company are expecting the revenues to grow 28.9% over the next twelve months, although estimates are likely to change post earnings.

There are others doing even better than Marqeta. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Marqeta's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 44.9% in Q3.

Marqeta Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.44 left to spend on developing new products, marketing & sales and the general administrative overhead. It improved significantly from the previous quarter, but due to the nature of its business it is still below the best software as a service businesses.

Key Takeaways from Marqeta's Q3 Results

With a market capitalization of $14.2 billion, more than $1.66 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We were impressed by how strongly Marqeta outperformed analysts’ revenue expectations this quarter. And we were also excited to see the really strong revenue growth. Zooming out, we think this was a great quarter and shareholders will likely feel excited about the results. The company is up 13.7% on the results and currently trades at $28.47 per share.

Marqeta may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.