Here's Why Marqeta Is Soaring on Wednesday
What happened
The stock market is having a weak day on Wednesday, with all three major indices slightly in the red as of 9:45 a.m. ET. However, fintech disruptor Marqeta (NASDAQ: MQ), which provides payment card technology to a number of leading financial services companies, was a standout, with shares up more than 15% just a few minutes after the opening bell.
So what
As you might guess, Marqeta's surge is related to its second-quarter earnings report, but it isn't just because of solid results. The numbers were certainly strong, with revenue up 24% year over year and total processing volume up 33%, even in the difficult economic climate.
However, the biggest reason for today's spike is promising news about Marqeta's largest customer -- Block's (NYSE: SQ) Cash App.
Marqeta's deal with Cash App was getting too close to its expiration date for comfort, and the company just announced that it has extended its deal to provide the financial technology powering the Cash App debit card through June 2027, removing a big unanswered question from investors' minds.
Now what
This news lets investors stop worrying about whether Marqeta's biggest revenue driver is going to stick around or not and allows them to focus on the company's massive growth potential instead. To be sure, Marqeta isn't profitable just yet (it posted a $59 million net loss in Q2), but its growth momentum and high-margin nature should allow it to chart a path to profitability as it scales. And with about $1.4 billion in cash and short-term investments, there's little reason for financial concern -- especially with the Cash App extension.
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Matthew Frankel, CFP® has positions in Block and has the following options: short January 2024 $200 calls on Block. The Motley Fool has positions in and recommends Block. The Motley Fool recommends Marqeta. The Motley Fool has a disclosure policy.
