On Tuesday, KeyBanc Capital Markets adjusted its stance on Marqeta Inc. (NASDAQ: MQ), downgrading the stock from Overweight to Sector Weight. The decision follows Marqeta's third-quarter financial report, which included a significant revision of its full-year 2024 revenue and gross profit guidance. The company also provided an initial outlook for 2025, projecting growth that falls considerably short of both company and market expectations.
The revised forecast for fiscal year 2025 suggests a gross profit growth of 15% year-over-year, a notable decrease from the previously anticipated 25%. Despite this projected reduction in gross profit, Marqeta aims to maintain its target for adjusted EBITDA dollars. This implies that the company is undertaking incremental cost-saving measures.
KeyBanc cited a major source of the guidance revision as the extended timelines for program implementation. This delay is attributed to increased regulatory scrutiny faced by Marqeta's partner banks. Additionally, the in-sourcing of services by select customers is contributing to the pressure on growth rates.
As Marqeta navigates through these challenges, which include external factors and the impact of customer in-sourcing, KeyBanc has revised its rating to reflect the company's structurally lower growth rate for fiscal year 2025. The downgraded rating to Sector Weight indicates a neutral stance, aligning with the industry average rather than outperforming it.
In other recent news, Marqeta, a prepackaged software services provider, has experienced a series of significant developments. The departure of Chief Product and Technology Officer, Randy Kern, has been confirmed, with his responsibilities being distributed among existing management team members.
Marqeta's Q2 earnings reported mixed results, with a 46% decrease in net revenue and a 6% contraction in gross profit, but a notable 32% year-over-year increase in total processing volume, reaching $71 billion.
The company has also announced the development of Marqeta Flex (NASDAQ:FLEX), a product designed to integrate Buy Now, Pay Later options within payment apps and digital wallets, in collaboration with Klarna, Affirm, and Branch.
Goldman Sachs has maintained a neutral rating on Marqeta, acknowledging the company's positive growth trajectory and potential for international expansion. Strategic partnerships with Varo Bank and Zoho have been established, and the company has received certification from Visa (NYSE:V) for flexible credential support.
These recent developments highlight Marqeta's strategic growth, despite mixed financial results. The company remains optimistic about achieving profitability and sustainable growth in the near future.
InvestingPro Insights
Recent InvestingPro data provides additional context to Marqeta's current situation. The company's market capitalization stands at $3.02 billion, reflecting its position in the fintech sector. Despite the challenges highlighted in KeyBanc's downgrade, Marqeta has shown strong short-term price performance, with a 22.93% return over the last month and a 27.41% return over the last three months.
However, the company's financial metrics reveal some concerns that align with KeyBanc's cautious outlook. Marqeta's revenue for the last twelve months as of Q2 2024 was $470.95 million, but more notably, it experienced a significant revenue decline of 44.19% during this period. This decline supports KeyBanc's decision to revise their rating based on lower growth expectations.
InvestingPro Tips further illuminate Marqeta's position. One tip indicates that analysts anticipate a sales decline in the current year, which corroborates the revised guidance mentioned in the article. Another tip suggests that the stock price movements are quite volatile, which investors should consider given the recent downgrade and market reactions.
For readers seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Marqeta, providing a deeper understanding of the company's financial health and market position.
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