Block (SQ) Beats Q4 Estimates, Relief Rally Results in 20% Gains
Shares of Block (NYSE: SQ) are up roughly 20% in premarket trading after the company reported better-than-expected Q4 financial results.
Block reported adjusted EPS of 27c, down from 32c in the year-ago period and above the expected 24c per share. Block reported $4.08 billion in revenue in the fourth quarter, up 29% YOY, topping the consensus estimates of $4.01 billion.
Cash App generated $2.55 billion in revenue, up 18% YOY, in line with the consensus estimates. Transaction-based revenue totaled $1.31 billion, in line with the analyst expectations. Subscription & services generated $772.1 million, up 72%, topping the consensus estimates of $690.5 million.
Bitcoin revenue was reported at $1.96 billion, up 12% YOY, slightly above the analyst consensus of $1.95 billion. Gross payment volume was reported at $46.33 billion, up 45% YOY, beating the estimated $46.13 billion.
Despite the beat, BMO analyst James Fotheringham lowered estimates on SQ, citing higher costs. As a result, the price target goes to $159.00 (from $172.00).
“Higher investments dampen SQ's near-term earnings outlook, but raise its organic revenue growth potential (the key determinant of its valuation multiple). SQ is off to an impressive start this year: gross profit +33% YoY (ex-Afterpay), with growth accelerating from January to February. These strong trends are notable, in contrast to SQ's recent share price draw-down (-41% YTD),” the analyst said in a client note.
BofA analyst Jason Kupferberg isn’t surprised by a sharp move higher in Block shares given recent underperformance.
“The fear factor heading into SQ’s 4Q print was high on multiple fronts, and the combination of 4Q results (ahead of sell-side consensus, which was ahead of buy-side) as well as better-than-expected forward-looking commentary should drive a meaningful relief rally in shares following major recent underperformance. We continue to believe shares are undervalued,” Kupferberg commented in a note.
By Senad Karaahmetovic | [email protected]