SQ Stock Climbs As Earnings Top Estimates Amid Afterpay Acquisition

Shares of Square-parent Block (SQ) jumped Friday after the company reported December-quarter earnings, net revenue and gross payment volume that topped analyst estimates. SQ stock moved higher despite slowing growth for consumer Cash App services and limited guidance for the acquisition of Afterpay.




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Square stock jumped 26.1% to close at 119.82 on the stock market today. San Francisco-based Block reported fourth-quarter earnings late Thursday.

Cash App had 44 million active monthly users at the end of December, up from 40 million in June, the company said. Cash App growth slowed less than expected in the fourth quarter.

“Despite consternation heading in, Cash App gross profit of $518 million, up 37% year-over-year, was 2% ahead of the Street,” Jefferies analyst Trevor Williams said in a note to clients.

SQ Stock: Cash App Outlook

At Susquehanna Financial, analyst James Friedman said in his note to clients: “Looking to Q1 2022, cash numbers look better than feared.”

He added: “Fears that Cash App users would not outlast stimulus checks seem to have been overblown as user and engagement metrics look strong. Gross profit per monthly active grew 13% year-over-year to $47 in the fourth quarter.”

Square earnings came in at 27 cents per adjusted share, down 15% from 32 cents in the year-earlier period. Analysts had projected earnings of 23 cents a share.

Gross profit increased 47% to $1.18 billion vs. estimates of $1.16 billion, the company said.

Square said net revenue jumped 62% to $4.42 billion, boosted by Cash App transactions for digital cryptocurrency Bitcoin. Analysts had predicted revenue of $4.04 billion.

Square Stock: Gross Payment Volume Meets Views

Adjusted revenue rose 54% to $1.4 billion, topping estimates of $1.34 billion. Gross payment volume from merchant customers rose 45% to $46.3 billion, in line with estimates.

Square said earnings before interest, taxes, depreciation and amortization, known as EBITDA, came in at $184 million vs. estimates of $143 million.

Square on Jan. 31 closed the acquisition of Australia-based consumer lending startup Afterpay. Announced on Aug. 1, the deal originally came in valued at $29 billion. The big drop in SQ stock, however, slashed that value to less than $15 billion at closing.

Afterpay competes in the emerging “buy now, pay later” market that encroaches on credit card networks.

Looking For Afterpay Guidance

“Management gave some color around Afterpay, but left many details out in anticipation of their investor day in May,” RBC Capital analyst Daniel Perlman said in a note. “Management noted the significance of Afterpay to the omnichannel strategy, enabling Square to serve customers with the large global merchants.”

At Keybanc Capital Markets, SQ stock analyst Josh Beck commented: “Afterpay synergies were an earnings call focus, with early achievements including day-one online merchant/BNPL integration and 100,000 Cash App leads to Afterpay merchants with a compelling vision to unite the consumer/seller ecosystems across channels and countries.”

Square stock had a Relative Strength Rating of only 5 out of a best-possible 99, according to IBD Stock Checkup.

Heading into the earnings report, SQ stock had retreated 58% over the last three months.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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