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Marqeta (NASDAQ:MQ) stock slid 4.3% in Wednesday premarket trading after BTIG analyst Lance Jessurun downgraded shares of the card-issuing platform to Sell from Neutral as “near-term headwinds have us concerned for near- and mid-term performance.”
Although the company last week posted solid quarterly results, Jessurun pointed out that its four-year contract renewal with Block’s (SQ) Cash App was signed at “mediocre unit economics,” he wrote in a note to clients.
Specifically, through the rest of 2023, the company expects the gross profit take rate it earns on Cash App volume to be about 40% lower as a result of the extension, Marqeta CFO Mike Milotich said during its Q2 earnings conference call.
On top of that, Marqeta’s (MQ) non-Block revenue is stagnating, the sell-side analyst said, as take rate compression took hold due to renegotiations of contracts at lower rates.
“A deceleration of revenue in non-Block business will further complicate efforts to deconsolidate revenue away from Block, and given a sizable portion of non-Block revenue is tied to BNPL [Buy Now, Pay Later], we don’t see a significant rebound in revenues in the near future, given our mediocre outlook for that sector,” the note said.
The Sell rating disagrees with the SA Quant system rating of Hold and the average Wall Street analyst rating of Buy.
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