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Earnings Results: Marqeta stock slumps toward worst day on record as CEO transition spooks some analysts

Shares of Marqeta Inc. were on pace to log their worst slide on record in Thursday trading after the payment-technology company disclosed several executive transitions and underwhelmed some analysts by maintaining its expectations for the back half of the year.

While Marqeta

topped expectations with its latest results, Chief Financial Officer Mike Milotich said on the card-issuing company’s earnings call that he thinks “it is prudent to be cautious about the next several months.” He noted that “many fintechs are being less aggressive about their investments and expansion,” and accordingly, Marqeta’s “expectations for the second half of the year remain unchanged” relative to the commentary the company issued in May.

Milotich added that while some of Marqeta’s more established customers may see the current landscape as an opportunity to get more aggressive and potentially win share, smaller and newer customers seem to be more cautious.

Additionally, Chief Executive Jason Gardner, also the company’s founder, said that he intends to transition out of the CEO role and into an executive chairman position.

“I’ve come to realize that I’m a pretty good entrepreneur,” Gardner said on the company’s earnings call, though he also said that he realizes he’s “not the best person to execute at this stage of growth.”

Further, Chief Operating Officer Vidya Peters plans to the leave the company.

The stock was off nearly 25% in morning trading Thursday and on track to record its largest single-day percentage decline.

Some analysts were particularly worried about Gardner’s transition.

“On the call, Mr. Gardner was humble about his eventual transition to the company’s Executive Chairman—he felt he had taken Marqeta from ‘zero to one,’ and that it was time to let Marqeta ‘grow from one to infinity’ under a new CEO—but our feeling is this phrasing understates how he has built Marqeta into a powerhouse in its space over the past decade,” wrote Wells Fargo analyst Jeff Cantwell. “We also believe this is happening a bit too early given the company just went public last year.”

Cantwell downgraded Marqeta’s stock to equal weight from overweight, writing that now “is a challenging time for MQ to be making a meaningful management announcement, as the numbers/commentary that came out during 2Q earnings about the go-forward environment for MQ were not great, by MQ’s lofty standards.”

SMBC Nikko Securities America analyst Andrew Bauch wrote that “eyebrows are raised any time there is a C-suite change,” though he was concerned in Marqeta’s case because the company has seen a number of executive moves in recent years.

He rates the stock at underperform with a $10 price target.

Others were more forgiving, with Morgan Stanley’s James Faucette writing that Gardner’s plans are “surprising,” but he nonetheless expects “a thoughtful transition.” Faucette has an overweight rating and $15 target price on Marqeta shares.

Barclays analyst Ramsey El-Assal wrote that Gardner’s shifting role could be among the factors weighing on Marqeta’s stock, though he thought that the transition makes sense.

“As MQ continues its transition from fintech startup to a more established enterprise, we believe the company will be better served by an established operator of enterprise-level companies,” he wrote. “We remain encouraged that Mr. Gardner will stay close to the company as becomes MQ’s executive director.”

On a different note, however, he highlighted that Block Inc.’s

concentration within Marqeta’s business is among “items to monitor.” El-Assal wrote that the portion of revenue derived from Block’s business increased to 69% in the latest quarter from 66% in the first quarter. The trend reflected momentum for the Cash Card and greater contributions from Afterpay related to the timing of Block’s acquisition.

“While Cash App Card’s strength is net positive for MQ, all things equal, we believe investors would prefer to see this ratio decline q/q (vs. increase),” El-Assal said. He rates Marqeta shares at overweight with a $19 price target.

For the second quarter, Marqeta recorded a net loss of $44.7 million, or 8 cents a share, compared with a loss of $68.6 million, or 29 cents a share, in the year-prior quarter. Analysts tracked by FactSet were expecting a 11-cent loss per share.

Marqeta reported a $10.2 million loss on the basis of adjusted earnings before interest, taxes, depreciation and amortization (Ebitda), compared with a $10.6 million loss on the metric a year before. The FactSet consensus was for a $19.1 million loss on the basis of adjusted Ebitda.

Marqeta’s revenue grew to $186.7 million from $122.3 million, while analysts were projecting $180.1 million.

The company generated $40.5 billion in total processing volume, up from $26.5 billion a year before.

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For the third quarter, Marqeta executives anticipate 36%-to-38% growth in net revenue along with an adjusted Ebitda margin of negative-8% to negative-9%.

Analysts surveyed by FactSet were looking for $180.0 million in revenue, up 36.9% from a year before. They were also looking for a $14.5 million loss on the basis of adjusted Ebitda, which would equate to an expected negative-8% Ebitda margin based on the consensus revenue figure.

Shares of Marqeta have rallied 26% over the past three months, though they’re down 72% over a 12-month span. The S&P 500

is up 7.5% over three months but down 4.9% over 12 months.

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