Digital payments provider Block Inc. (NYSE: SQ) reported robust fourth-quarter results beating both earnings and revenue expectations. Following the news, shares continued their upward trajectory during the extended trading session, advancing 18.3% after ending the day up 7.1% at $94.99 on February 24.
The company also completed the acquisition of BNPL provider Afterpay on January 31, 2022, for which the company will start consolidating the results in the first quarter of FY 2022.
Robust Q4 Results
Block’s quarterly adjusted earnings stood at $0.27 per share, 2 cents higher than analysts’ estimates, but lower than Q4FY20 earnings of $0.32 per share.
Block reported Q4 net revenue of $4.08 billion, growing 29% year-over-year and beating analysts’ estimates of $4.06 billion. Notably, excluding bitcoin revenue of $1.96 billion, Q4 net revenue jumped 51% to $2.12 billion. During the quarter, transaction-based revenue contributed $1.31 billion, and Subscription and services-based revenue generated $772 million.
In Q4, there were 44 million monthly transacting actives on Cash App, growing 22% compared to the prior-year quarter. Out of which, 31% or 13 million actives used Cash Card.
For FY21, Block’s net revenue of $17.66 billion leaped 86% over the FY20 number. Further, excluding bitcoin revenue of $10.01 billion, net revenue grew 55% to $7.65 billion.
Additionally, FY21 adjusted earnings came in at $1.71 per share, better than the FY20 number of $0.84 per share.
CEO Comments
In a shareholder letter, Block CEO, Jack Dorsey, said, “On January 31, we completed our acquisition of Afterpay, a global “buy now, pay later” (BNPL) platform. We believe this acquisition will further Block’s strategic priorities for Square and CashApp by strengthening the connections between our ecosystems as we deliver compelling financial products and services for consumers and merchants.”
“Together, we intent to enable Square sellers of all sizes to offer BNPL at checkout, offer Afterpay consumers the ability to manage their instalment payments directly in CashApp, and give CashApp customers the ability to discover sellers and BNPL offers directly within the app,” Dorsey added.
Analysts’ Take
Pleased with Block’s quarterly performance, Mizuho Securities analyst Dan Dolev reiterated a Buy rating on the stock with a price target of $210, implying a whopping 121% upside potential to current levels.
Commenting on the results, Dolev said, “The looming acceleration in the Cash App incremental gross profit, coupled with solid Seller (now dubbed Square) and upbeat Afterpay trends, is already driving a very positive stock reaction pre-market. We expect the positive momentum to continue as the year progresses.”
Furthermore, the analyst expects an accelerated stock market reaction after Block’s analyst day as was proven in history.
With 20 Buys and 2 Holds, the SQ stock commands a Strong Buy consensus rating. The average Block price target of $210.36 implies 121.5% upside potential to current levels. Its shares have lost 58.2% over the past year.
Stock Investors
TipRanks’ Stock Investors tool shows that investor sentiment is currently Very Positive on Block, with 7.7% of portfolios tracked by TipRanks increasing their exposure to SQ stock over the past 30 days.
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