Heading into Block’s (SQ) Q4 earnings report, there were concerns the company would follow in the footsteps of other digital payment strugglers and provide a subpar display. Those fears appeared unsubstantiated after the company delivered the goods and signaled the company’s star offering, the Cash App, is doing just fine.
Revenue increased by 29.1% year-over-year to reach $4.08 billion, in turn beating the Street’s call by $20 million. On the bottom-line, non-GAAP EPS of $0.27 came in ahead of the consensus estimate by $0.05.
Gross profit rose by 47% to $1.18 billion compared to the analysts’ forecast of $1.16 billion and breaking the decelerating trend that jinxed the company in recent quarters, Cash App gross profit finally re-accelerated sequentially, coming in at $518 million.
This is an important development, says Mizuho’s Dan Dolev, but not at all the highlight of the report.
“The 1Q guide was the defining moment on the call,” says Dolev, who believes management’s commentary that on a two-year CAGR basis, the Cash App increased by 71% in the months of January and February and should “further improve” in March, drove the share price up following the call. Ultimately, what this suggests is that Cash App gross profit could reach $550 million in Q1.
But that’s not all. Given recent product launches like Cash App Pay, family, and taxes, for the rest of 2022, the company sees even more “momentum.” “All of this should help drive an acceleration in 2H,” notes the analyst.
Additionally, there could be another catalyst looming; the company will hold an analyst day on May 18th. “History indicates that the 2017 analyst day was a nice catalyst, as the stock more than doubled in the six months following the event,” said a bullish Dolev.
It’s a Buy, then, from the Mizuho analyst, who also maintains a $210 price target, suggesting shares could climb by 121% in the year ahead. (To watch Dolev’s track record, click here)
Most analysts agree; based on 21 Buys vs. 2 Holds, the stock boasts a Strong Buy consensus rating. The $208.83 average target is just a touch under Dolev’s objective. (See Block stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
