Block Inc (NYSE:SQ) shares traded higher by 23% on Friday after the company exceeded expectations with its fourth-quarter earnings report.
On Thursday afternoon, Block reported fourth-quarter adjusted EPS of $1.71, beating consensus analyst estimates of $1.66. Fourth-quarter revenue was $4.1 billion, in-line with analyst expectations. Revenue was up 29.1% from a year ago.
The company ended the year with 44 million monthly average users and 13 million monthly active debit card users, up 20% from a year ago.
Cash App generated $1.96 billion in Bitcoin (CRYPTO: BTC) in the quarter, up 12% year-over-year. The company also reported holding $371 million in Bitcoin on its balance sheet.
Looking ahead, Block guided for Square gross payment volume growth of 35% in the months of January and February.
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Relief Rally: Bank of America analyst Jason Kupferberg said Friday's relief rally in Block shares is no surprise.
"We continue to believe shares are undervalued based on our SOTP analysis, and look to integration of Afterpay (APT) acquisition, 1Q results, and a newly-announced Investor Day on May 18 as potential catalysts," Kupferberg wrote.
Raymond James analyst John Davis said Block's commentary on the first quarter was better than feared.
"That said, March includes particularly difficult stimulus related comps, and although mgmt expects the 2-yr CAGR to accelerate in March, we would note gross profit growth could be negative y/y especially if the benefit from taxes is pushed out to Apr/May," Davis wrote.
Fintech Sentiment Shift: Rosenblatt Securities analyst Sean Horgan said Block has a unique opportunity in the crypto payments space.
"Net/net, SQ is an innovative company that historically is unafraid of disrupting the status quo and we believe it will continue to do so (perhaps more emphatically with crypto)," Horgan wrote.
KeyBanc analyst Josh Beck said Block's quarter could turn the tide of negative investor sentiment in the entire fintech market.
"We believe this quarter could serve as a clearing event for the broader FinTech industry as sentiment shifts from 2022 unknowns (e.g., tough comps, rising investment) to the longer-run opportunity to digitize/modernize finance & commerce, upon which we think SQ is uniquely positioned to execute," Beck wrote.
Needham analyst Mayank Tandon said Square shares offer investors a favorable risk-reward balance for a stock with a large, secular growth opportunity.
"While SQ continues to withhold guidance, we believe the company is well-positioned to generate robust growth over the next several years, and expect the recent Afterpay acquisition to give SQ another lever to accelerate international expansion and integrate BNPL products into both its Seller and Cash App ecosystems," Tandon wrote.
Ratings And Price Targets:
- Bank of America has a Buy rating and $185 target.
- Raymond James has a Market Perform rating.
- Rosenblatt Securities has a Buy rating and $210 target.
- KeyBanc has an Overweight rating and $175 target.
- Needham has a Buy rating and $175 target.
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