Morgan Stanley Says Marqeta Earnings Face Growth Pressure

Marqeta stock dipped 4.2% Monday morning (April 3) after being downgraded by Morgan Stanley.

The stock of the provider of card issuing and payment solutions was shifted from Overweight to Equal-weight by the investment bank and wealth management firm, Seeking Alpha reported Monday.

Marqeta did not immediately reply to PYMNTS’ request for comment.

Morgan Stanley said Marqeta faces growth headwinds over the next 12 months, including a growing share of its sales being accounted for by Square — which made up three-quarters of Marqeta’s sales in the fourth quarter — while the share held by other customers slipped, according to the report.

The macroeconomic environment also contributed to the downgrading of the stock, as expense management and buy now, pay later (BNPL) face emerging headwinds, Morgan Stanley said, per the report.

In addition, Marqeta’s acquisition of Power Finance has caused a reduction in pro-forma net cash, the report said.

A week earlier, Wolfe upgraded the stock from Peer Perform to Outperform, saying that the market had underappreciated Marqeta’s business and that credit and embedded finance can drive both growth and margin, Seeking Alpha reported March 27.

Marqeta announced Jan. 30 that it will acquire Power Finance, a cloud-native platform that provides companies with credit card management services when they launch new card programs, in a $275 million deal.

The combination of the two companies’ platforms will allow customers to launch a range of credit products, merging their rewards technologies, Marqeta said at the time.

“We thoroughly examined possible acquisitions to more quickly establish Marqeta’s leadership in the modern credit space,” said Simon Khalaf, Marqeta’s then-incoming CEO who took on that role the following day. “It became clear to us that Power would strengthen Marqeta’s platform with a best-in-class tech stack for credit card program management.”

Marqeta had announced Jan. 26 that Khalaf, who had joined the company in June as chief product officer, would become CEO Jan. 31.

When reporting earnings Feb. 28, Marqeta said BNPL volumes had slowed but remained in the double digits. It also said that many of its customers were tightening their own spending and credit requirements.