What Happened:
Shares of leading edge card issuer Marqeta (NASDAQ: MQ) jumped 22% in the morning session after company reported second quarter results that beat analysts' expectations for TPV (total processing volume) and revenue. Adjusted EBITDA also beat by a meaningful amount. In addition, the company announced it agreed to a four-year extension with Block to continue powering the Cash App card product effective on July 1, 2023, through June of 2027.
On the other hand, its gross margin deteriorated, and the company continued to burn cash. Overall it was a positive quarter for the company, with top and bottom-line metrics beating expectations. Investors are also likely excited by the potential inherent in the extended deal with Block.
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What is the market telling us:
Marqeta's shares are quite volatile and over the last year have had 44 moves greater than 5%. But moves this big are very rare even for Marqeta and that is indicating to us that this news had a significant impact on the market's perception of the business.
The previous big move was three months ago, when the stock dropped 7.69% on the news that the company reported first quarter revenue and adjusted EBITDA that exceeded analysts expectations. However, EPS missed, gross margin deteriorated, and cash burn increased. Revenue guidance for the next quarter also missed Consensus while adjusted EBITDA guidance beat. To add more color to the profitability guidance, management noted that " it will accelerate the realization of its efficiency goals and take restructuring actions in Q2 to reduce operating expenses by $40-$45 million on an annual run rate basis." Despite the encouraging profitability outlook, the overall results were mixed.
Marqeta is down 2.9% since the beginning of the year, and at $5.70 per share it is trading 48.5% below its 52-week high of $11.05 from August 2022. Investors who bought $1,000 worth of Marqeta's shares at the IPO in June 2021 would now be looking at an investment worth $186.76.
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