Shares of leading edge card issuer Marqeta (NASDAQ: MQ) jumped 6.4% in the morning session after the company reported third quarter results that beat Wall Street's expectations for revenue and Total Processing Volume, though EPS missed. Gross margin also improved significantly during the quarter, and free cash flow turned positive. The results were impressive, given the anticipated headwinds from the Cash App contract renewal that was signed last quarter. It is important to note that the terms of the renewal meant certain businesses would no longer be included on Marqeta's income statement. In the previous quarter, the company expected the change in revenue presentation to materially reduce reported net revenue.
Looking ahead, the company highlighted the potential of its new credit card platform as well as its expanded relationship with Block. The agreement with Block includes a 5-year renewal for the Square debit card through June 2028, alongside an extension of the deal with Cash App. Overall, the results presented several positive developments and provided ample reasons for investors to stay positive.
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What is the market telling us:
Marqeta's shares are quite volatile and over the last year have had 32 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock gained 22% on the news that 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.
Marqeta is up 8.7% since the beginning of the year, but at $6.39 per share it is still trading 15.1% below its 52-week high of $7.53 from November 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 $209.08.
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