Marqeta’s Shares Plummet 43% Amid Regulatory Scrutiny and Disappointing Q4 Forecast
The payment card partner for firms like Block and Affirm, Marqeta Inc., saw its shares tumble 43% after announcing a disappointing fourth-quarter outlook. The Oakland, California-based company cited increased regulatory scrutiny of the banking environment as a key factor contributing to the outlook.
Regulatory Hurdles Delay Client Program Launches
Heightened regulatory scrutiny has led to delays in getting clients’ card programs up-and-running, according to Chief Financial Officer Mike Milotich. Card launches initially planned for the third quarter have been pushed into the fourth quarter and early 2025, affecting gross profit. The time it takes to launch a client program has increased significantly, from an average of 150 days to over 200 days in the first half of 2024.
Gross Profit Guidance Falls Short of Expectations
Marqeta’s fourth-quarter gross-profit guidance growth of 13%-to-15% falls short of the 23% consensus forecast by Bloomberg Intelligence analysts. The company’s stock plummeted to $3.42 on Tuesday, marking a record one-day plunge. Year-to-date, the stock is down 51%.
Analysts Slash Price Forecasts
In response to the disappointing outlook, analysts at JPMorgan Chase & Co. and Morgan Stanley cut their price forecasts to $5 from $6 and $7, respectively. Mizuho analyst Dan Dolev also reduced his forecast to $5 from $7, citing the third-quarter results as perhaps “the most disappointing quarter in Marqeta’s short history.”
Third-Quarter Results: A Mixed Bag
Marqeta’s third-quarter loss narrowed to $23.6 million, or 6 cents a share, from $55 million, or 10 cents, in the year-earlier period. Revenue rose 17% to about $128 million, meeting analysts’ forecasts of $127.9 million.
Navigating Regulatory Challenges
The altered guidance comes as regulators grapple with oversight of partnerships between fintechs and banks. The bankruptcy of banking-as-a-service provider Synapse has highlighted the need for more efficient program approval and onboarding processes. Marqeta is working with existing bank partners to address these challenges and plans to add at least two new bank partners to its network to meet client demand.
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