BLock shares accelerated growth on positive report and forecasts
2023.02.24 06:37
BLock shares accelerated growth on positive report and forecasts
By Kristina Sobol
Budrigannews.com – The Block Inc. After the digital payments company announced profit guidance for the entire year that was higher than anticipated, shares are trading nearly 8% higher in the premarket on Friday.
Block reported a profit per share (EPS) of $0.22 on revenue of $4.65 billion in the fourth quarter, exceeding the average analyst estimate of $0.30 on revenue of $4.62 billion. The company’s biggest revenue source, Cash App, saw sales of $2.86 billion, up 12% YoY and above the consensus of $2.73 billion. “We delivered strong growth and profitability at scale during the fourth quarter of 2022,” the company stated in a letter to shareholders.
Block also provided guidance for FY23, estimating adjusted EBITDA of $1.3 billion, which was higher than the $1.28 analyst estimate.
The company went on to say that, “Based on trends in our business year to date as of earnings, we expect adjusted EBITDA margin to expand by at least one percentage point year over year” and that “adjusted operating income margin will also expand on a year-over-year basis in 2023 compared to 2022.” This is in comparison to the previous year, which was 2022.
As EBITDA visibility is a “welcome sight,” analysts at Wolfe Research raised the price target for SQ stock from $80 to $95 per share.
“SQ intends to maintain its stated profit targets for 2023, indicating the company’s flexibility in spending in the event of slower-than-anticipated growth. In a note, they stated, “We believe this may give investors a sense of increased visibility into future profitability, something that some have found to be uncertain prior to the print.”
After earnings, KeyBanc analysts gave Block the same designation as Key Idea.
They stated, “We modestly trim our estimates primarily to reflect discretionary segment headwinds that have cropped up in the Square seller business exiting 2022. However, we remain OW as we believe the quality of growth in the Cash App business is improving (e.g., Cash Card GP rose to 26% of mix growing 56% y/y) and see drivers like rising direct deposit attach and new products (e.g., Borrow already scaled to >$100M GP run-rate following)
