Reporting Season

Block shares bounce 40% on quarterly earnings and an upbeat outlook

Fri 25 Feb 22, 12:26pm (AEST)
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Key Points

  • Block shares were down almost -70% since its Afterpay takeover offer on 2 August
  • Key financial metrics all came in slightly above analyst expectations
  • Afterpay results will be included in the March quarter

Block (ASX: SQ2) investors can breathe a sigh of relief as a quarterly earnings beat rallied the stock 40% higher as the market opened. 

Looming interest rate hikes and a broad-based pivot away from technology stocks has dragged Block shares almost -70% lower since its offer to takeover Afterpay on 2 August 2021.

Quarterly financials at a glance 

  • Revenue of US$4.08bn, up 29% 

  • Gross profit of US$1.18bn, up 47%

  • Net loss of -US$77m

  • Cash and cash equivalents of US$4.44bn 

Revenues came in slightly ahead of the US$4.04bn forecasts from analysts tracked by FactSet. 

Other financial metrics including gross profits, net loss and earnings per share all came in slightly above analyst expectations.

Block in a nutshell 

For the uninitiated, Block’s business primarily consists of Square and the Cash App. 

The Cash App is a mobile banking app that enables users to send and receive money, as well as buy/sell stocks and cryptocurrencies. 

From an earnings perspective, Square and the Cash App contributed a respective US$658m (56%) and US$518m (44%) in December quarter gross profits. 

Current trends

In January and February, Square gross payment volumes were up 35% year-on-year. The company said it experienced a slowdown in volumes in January, likely due to the effects of omicron, before growth recovered in February. 

"Global expansion is one of Square’s key strategic priorities in 2022 given the significant market opportunity," the company said in its shareholder letter.

Block said that it expects the Cash App gross profit to grow year-over-year, but no specific update was provided. 

"Despite a roll off in government disbursements in the fourth quarter, we saw strength in recurring paycheck deposits, which we view as a key barometer of customers using Cash App for their primary banking needs."

Afterpay’s performance will be included in the company’s March quarter results.

Square share price chart
Block (US-listed) 12-month share price chart

 

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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