Shares of Marqeta (NASDAQ: MQ) fell 5.5% on Thursday, closing at $6.68. New analyst coverage and the latest interest rate hike by the Fed led to the selling pressure. The stock is down 61% year to date.
Marqeta is a fintech that provides payment infrastructure that allows businesses to issue payment cards and process transactions. The stock, as well as several others in the payment industry, finished Thursday's session in the red. A big negative catalyst for Marqeta and these payment stocks was the Federal Reserve's announcement Wednesday afternoon that it would raise interest rates by another 75 basis points.
This was the third straight 75-basis-point hike, and Fed Chair Jerome Powell indicated that more are coming until inflation starts moving down. But the Fed also acknowledged that there could be some "pain," as the economy will slow down. Generally speaking, this is not good news for companies that rely on payments and consumer spending, thus the sell-off across the industry.
But Marqeta shareholders were also likely reacting to company-specific news, as Wedbush recently initiated coverage on the fintech specialist with a neutral rating and established an $8 price target. In a research note that came out yesterday, Wedbush analyst Moshe Katri cited some concerns with Marqeta, including its outsize relationship with one client (Block), as well as its significant exposure to the buy now, pay later (BNPL) industry, according to The Fly.
As Katri stated in his note, Marqeta generates a big chunk of revenue from its relationship with Block -- specifically, about 69%. With the contract with Block slated to end at the close of 2024, Marqeta would obviously love to extend this partnership, as it has been such a cash cow for the company. This will be something to keep an eye on down the road.
In the near term, Marqeta will be looking to bring on a new CEO after founder and CEO Jason Gardner announced in August that he is stepping down, saying it was time for someone to lead the company to the next stage of growth. Gardner will remain executive chair. While still not profitable, Marqeta has been growing fast and expects Q3 revenue to increase 36% to 38% year over year. But the economic uncertainty could create a more difficult environment for the payment industry stock in the coming quarters.
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Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Block, Inc. The Motley Fool recommends Marqeta, Inc. The Motley Fool has a disclosure policy.
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