Square-parent Block reported fourth-quarter earnings that missed estimates while revenue and gross profit edged by Wall Street targets. SQ stock rose as Cash App profit growth topped expectations in the quarter.
The financial technology company reported December-quarter earnings after the market close on Thursday.
"Cash app gross profits grew 64% year-over-year to $848 million, beating (expectations)," said Susquehanna analyst James Friedman in a report. "Square seller segment gross profits grew 22%, below (estimates). Larger seller merchants were strong, but overall growth was slowed by deceleration in small business volume."
The Square Cash App helps individuals manage money and buy stocks and cryptocurrency.
At Bank of America, analyst Jason Kupferberg is bullish on Cash App.
"Cash App had five products that each generated $100 million-plus in gross profit in 2022, including Cash App Card which had over $750 million in gross profit," he said in a note to clients.
Square Stock: Guidance Meets Views
Earnings before interest, taxes, depreciation and amortization, a key metric known as EBITDA, in the fourth quarter popped 53% to $281 million, beating estimates of $225 million. For full-year 2023, Square forecast EBITDA of $1.3 billion, in line with estimates of $1.296 billion.
"For 2023, SQ intends to limit headcount growth to 10%, down from 46% last year," Evercore ISI analyst David Togut said in a note. "Management also intends to find ways to leverage its real estate footprint."
Square earnings for the quarter ended Dec. 31 were 22 cents per share on an adjusted basis, down 21% from the year-earlier period. Analysts had projected earnings of 30 cents a share.
Also, Square said net revenue rose 14% to $4.65 billion, including Cash App transactions for digital cryptocurrency Bitcoin. SQ stock analysts had predicted revenue of $4.62 billion.
Financial analysts also view gross profit as a key metric for SQ stock. Gross profit came in at $1.66 billion, up 40%, vs. estimates of $1.63 billion.
"SQ brushed off macro concerns and delivered Q4 gross profit growth of 40%, above expectations as management highlighted stable to improving trends in January and February across all ecosystems," Deutsche Bank analyst Bryan Keane said in a note.
However, gross payment volume from merchant customers rose 14% to $48.6 billion, missing estimates of $55.35 billion.
SQ Stock: Cash App Beats Views
But Jefferies analyst Trevor Williams said Cash App beat expectations.
"Top-line upside in Cash App on 45% year-over-year revenue growth, excluding Afterpay, offset a GPV-driven miss," he said in a note.
Shares in Block rose 4.3% to close at 77.36 on the stock market today amid a selloff on the Nasdaq Composite. SQ stock had advanced 16% in 2023 heading into the Block earnings report.
San Francisco-based Block's earnings included consumer lending firm Afterpay.
Block recognized a loss on its Bitcoin investments, which totaled $220 million in 2020 and 2021. For 2022, Block recognized a bitcoin impairment loss of $47 million on its investments.
Meanwhile, SQ stock holds a weak Relative Strength Rating of 58 out of a best-possible 99, according to IBD Stock Checkup.
Square holds $5 billion on its balance sheet.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
