What Happened:
Shares of leading edge card issuer Marqeta (NASDAQ: MQ) fell 5% in the afternoon session after major indices declined with the Nasdaq down 2.1% while the S&P 500 fell by 0.9%. Netflix reported mixed results to kick off the new earnings season. The video-streaming giant provided underwhelming sales guidance for the full year and guided for growth to decelerate in the second half of the year. Also, Netflix surprisingly announced it will stop disclosing subscriber count (starting in the first quarter of 2025), and this is contributing to the market's concerns about the business. The company's post-earnings stock decline is likely dampening the sentiment toward tech stocks.
It was a challenging week for most risk assets following news of escalating tension between Israel and Iran, which is raising concerns among investors, given the potential disruptions to business supply chains, especially in the Middle East.
These add to the ongoing inflation worries after the March 2024 CPI (Consumer Price Index - a gauge of the average price consumers pay for goods and services) report revealed inflation came in slightly hotter than expected. On April 16, 2024, Fed Chair Jerome Powell echoed similar sentiment, adding, "The recent data have clearly not given us greater confidence and instead indicate that it's likely to take longer than expected to achieve that confidence." This suggests the Fed might not lower its policy rates as fast as anticipated in 2024, with markets pricing in fewer rate cuts for the year.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Marqeta? Access our full analysis report here, it's free.
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 8 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 down 23% since the beginning of the year, and at $5.24 per share it is trading 28.5% below its 52-week high of $7.33 from February 2024. Investors who bought $1,000 worth of Marqeta's shares at the IPO in June 2021 would now be looking at an investment worth $171.85.
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