Dorsey's Square hit by 15% stock drop after results

SAN FRANCISCO — Shares of Square plunged as much as 15% Friday after the mobile payments provider announced a larger-than-expected quarterly loss on Thursday.

The San Francisco-based company, co-founded and run by Twitter co-founder Jack Dorsey, on Thursday reported an adjusted first-quarter loss of 14 cents per share on adjusted revenue of $146 million. (Total net revenue including sales from a Starbucks deal it's in the process of unwinding was $379 million, up 51% from a year earlier, while its net loss was 29 cents.)

Analysts polled by S&P Global Market Intelligence expected a loss of 9 cents a share on $136 million in sales.

The wider-than-expected loss, on soaring operating costs, sent Square's stock reeling more than 15%, to $10.97 in Friday trading.

Square announced its results after markets closed. During regular trading, Square (SQ) was down 2% to $13.07. The stock debuted at $11.20 a share when it went public in November.

Square did announce first-quarter gross payment volume of $10.3 billion, up 45% from a year earlier. And it raised its revenue guidance for the year to $615 million to $635 million.

"The core business is really strong," Dorsey told CNBC in an interview.

But operating expenses surged 72% to $207 million.

The stock plunge caught some analysts by surprise, especially since most of Square's financial trends are "moving in the right direction," said Jan Dawson, an analyst at market researcher Jackdaw. He added that $50 million in legal costs linked to a settlement with Washington University professor, Robert E. Morley, Jr., who claimed to have invented the Square card-reader, was not a long-term concern.

A slowdown in consumer retail sales, from which Square gleans much of its revenue, is a major story line for the company, RBC Capital Markets analyst Daniel Perlin said in a recent report.

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