Marqeta Earnings: Volume Growth and Good Expense Management Help Offset the Impact of New Contracts

No-moat-rated Marqeta reported decent first-quarter earnings that were in line with our expectations. While net revenue decreased 46% from last year to $118 million, the intensity of this decline was exaggerated by Marqeta's new revenue recognition methodology for its relationship with Block. Gross profit, which controls for this change, decreased 6% from last year to $84.2 million. The decrease was entirely due to weaker pricing from the agreements with Block, as processing volume growth remained strong. As we incorporate these results, we do not plan to materially alter our $7 per share fair value estimate. We see the shares as modestly undervalued at current prices, although we would note our Very High Uncertainty Rating as Marqeta still suffers from severe customer concentration issues.