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Earnings season continues to roll along with companies finally unveiling their long-awaited quarterly results. We’ve witnessed adverse market reactions to many Q1 reports, which is typically not the case. Companies have faced a challenging 2022 climate with skyrocketing energy prices, supply-chain bottlenecks, inflation, and geopolitical issues.
The widely-known Block (SQ - Free Report) is on deck to report quarterly results on Thursday after the bell rings. Formally known as Square, the company offers financial and marketing services through its comprehensive commerce system aimed at assisting sellers to start, run, and grow their businesses.
After a meteoric rise over the last couple of years, it’s been a rough start to 2022 for Block shares. Down 40% so far in 2022, the share performance doesn’t even come close to the S&P 500’s 12% decline.
Image Source: Zacks Investment Research
Once we extend the timeframe to over the last year, we see that it hasn’t been just a rough 2022 but a turbulent year overall. Down close to 60%, SQ shares broke off from the general market around November 2021 and took a sharp downwards trajectory. In March, a small relief rally helped SQ, but shares could not sustain the uptrend.
Image Source: Zacks Investment Research
Previous Share Reactions
In its latest quarterly earnings release, shares reacted very well, climbing 35% following a strong EPS beat of 42%. Overall, the market has responded well to EPS beats and poorly to EPS misses in the recent term, with shares declining nearly 16% following its Q3 2021 EPS miss of 2%.
Down well off its 2021 highs, a strong EPS beat could give shares fuel for a small rally. However, a more profound decline could still be in store; SQ’s forward-earnings multiple of 100.2X reflects a rich valuation. Additionally, with the mixed reactions we’ve witnessed from other companies’ quarterly results, it isn’t easy to paint a bullish picture moving forward.
Recent Quarterly Reports
Whenever SQ has exceeded EPS expectations over its last four quarterly reports, the company has beaten estimates quite extensively. Over its last four quarters, the company has smoked earnings estimates three out of four times, with the singular miss coming in 2021 Q3. The average EPS surprise over this time frame is a staggering 75%.
Quarterly revenue for the company has recently begun to cool off. SQ has missed sales estimates in two out of its last four quarterly releases; in 2021 Q3, Block fell short of the $4.4 billion estimate by a notable 12%, and in 2021 Q2, the company missed sales expectations by nearly 7%. After years of beating revenue estimates, this recent development is concerning. The chart below illustrates quarterly revenue.
Image Source: Zacks Investment Research
Q1 EPS & Revenue Forecast
The growth picture has begun to slow down for SQ. The Zacks Consensus Estimate for Q1 sits at $0.12 per share, reflecting a very concerning 70% decline in earnings from the year-ago quarter. Additionally, the Consensus Estimate Trend has retraced 30% over the last 60 days, brought down by four analysts negatively revising their Q1 estimates.
Moving onto quarterly revenue, the $4.2 billion Zacks Consensus Estimate for Q1 has the top line shrinking by nearly 16% compared to the $5.1 billion SQ revenue value from the year-ago quarter. Although, the top line is forecasted to expand by 7% in FY22.
PayPal Comparison
Another fintech company we can use for comparison, PayPal (PYPL - Free Report) , has also performed poorly in 2022. So far, throughout 2022, PYPL shares have lost more than half, or 54% of their value. The company recently reported quarterly results, with EPS falling in line with expectations and quarterly revenue beating estimates marginally.
Over the last four quarters, the fintech player has acquired an average EPS surprise of just above 1%. Additionally, the Zacks Consensus EPS Estimate for the current year has earnings shrinking by 15%, and for the next year, earnings are forecasted to slip a considerable 17%.
Following its latest report, shares saw a nice tick upwards but have since fallen back during the rough market waters we have been sailing in over the last week. Overall, the outlook for fintech companies has significantly shifted, further displayed by the Consensus Estimate Trend for the current and next fiscal year.
PayPal Holdings, Inc. Price, Consensus and EPS Surprise
It’s been a trying time for SQ shares throughout 2022. In March, a sizable rally had shares looking like they had finally shaken out of their downtrend. However, the favorable price action did not have nearly enough strength.
The share performance throughout the past year is pretty telling; the growth picture for SQ has recently taken a sizable hit. I believe that this is the same situation that we witnessed go down in Netflix (NFLX - Free Report) and Amazon (AMZN - Free Report) shares following their quarterly releases.
Additionally, with a forward earnings multiple in the triple digits, the stock is still displaying extremely rich valuation levels – even after shares have lost more than half of their value. As further seen with PayPal, the sentiment towards fintech stocks has undoubtedly shifted. I believe that investors should heed caution going into the quarterly release, especially with a slowdown in the growth picture and the current market environment.
SQ is currently a Zacks Rank #3 (Hold) with an overall VGM Score of a D.
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Block (SQ) Q1 Preview: Can Shares Snap Downtrend?
Earnings season continues to roll along with companies finally unveiling their long-awaited quarterly results. We’ve witnessed adverse market reactions to many Q1 reports, which is typically not the case. Companies have faced a challenging 2022 climate with skyrocketing energy prices, supply-chain bottlenecks, inflation, and geopolitical issues.
The widely-known Block (SQ - Free Report) is on deck to report quarterly results on Thursday after the bell rings. Formally known as Square, the company offers financial and marketing services through its comprehensive commerce system aimed at assisting sellers to start, run, and grow their businesses.
After a meteoric rise over the last couple of years, it’s been a rough start to 2022 for Block shares. Down 40% so far in 2022, the share performance doesn’t even come close to the S&P 500’s 12% decline.
Image Source: Zacks Investment Research
Once we extend the timeframe to over the last year, we see that it hasn’t been just a rough 2022 but a turbulent year overall. Down close to 60%, SQ shares broke off from the general market around November 2021 and took a sharp downwards trajectory. In March, a small relief rally helped SQ, but shares could not sustain the uptrend.
Image Source: Zacks Investment Research
Previous Share Reactions
In its latest quarterly earnings release, shares reacted very well, climbing 35% following a strong EPS beat of 42%. Overall, the market has responded well to EPS beats and poorly to EPS misses in the recent term, with shares declining nearly 16% following its Q3 2021 EPS miss of 2%.
Block, Inc. Price, Consensus and EPS Surprise
Block, Inc. price-consensus-eps-surprise-chart | Block, Inc. Quote
Down well off its 2021 highs, a strong EPS beat could give shares fuel for a small rally. However, a more profound decline could still be in store; SQ’s forward-earnings multiple of 100.2X reflects a rich valuation. Additionally, with the mixed reactions we’ve witnessed from other companies’ quarterly results, it isn’t easy to paint a bullish picture moving forward.
Recent Quarterly Reports
Whenever SQ has exceeded EPS expectations over its last four quarterly reports, the company has beaten estimates quite extensively. Over its last four quarters, the company has smoked earnings estimates three out of four times, with the singular miss coming in 2021 Q3. The average EPS surprise over this time frame is a staggering 75%.
Quarterly revenue for the company has recently begun to cool off. SQ has missed sales estimates in two out of its last four quarterly releases; in 2021 Q3, Block fell short of the $4.4 billion estimate by a notable 12%, and in 2021 Q2, the company missed sales expectations by nearly 7%. After years of beating revenue estimates, this recent development is concerning. The chart below illustrates quarterly revenue.
Image Source: Zacks Investment Research
Q1 EPS & Revenue Forecast
The growth picture has begun to slow down for SQ. The Zacks Consensus Estimate for Q1 sits at $0.12 per share, reflecting a very concerning 70% decline in earnings from the year-ago quarter. Additionally, the Consensus Estimate Trend has retraced 30% over the last 60 days, brought down by four analysts negatively revising their Q1 estimates.
Moving onto quarterly revenue, the $4.2 billion Zacks Consensus Estimate for Q1 has the top line shrinking by nearly 16% compared to the $5.1 billion SQ revenue value from the year-ago quarter. Although, the top line is forecasted to expand by 7% in FY22.
PayPal Comparison
Another fintech company we can use for comparison, PayPal (PYPL - Free Report) , has also performed poorly in 2022. So far, throughout 2022, PYPL shares have lost more than half, or 54% of their value. The company recently reported quarterly results, with EPS falling in line with expectations and quarterly revenue beating estimates marginally.
Over the last four quarters, the fintech player has acquired an average EPS surprise of just above 1%. Additionally, the Zacks Consensus EPS Estimate for the current year has earnings shrinking by 15%, and for the next year, earnings are forecasted to slip a considerable 17%.
Following its latest report, shares saw a nice tick upwards but have since fallen back during the rough market waters we have been sailing in over the last week. Overall, the outlook for fintech companies has significantly shifted, further displayed by the Consensus Estimate Trend for the current and next fiscal year.
PayPal Holdings, Inc. Price, Consensus and EPS Surprise
PayPal Holdings, Inc. price-consensus-eps-surprise-chart | PayPal Holdings, Inc. Quote
Bottom Line
It’s been a trying time for SQ shares throughout 2022. In March, a sizable rally had shares looking like they had finally shaken out of their downtrend. However, the favorable price action did not have nearly enough strength.
The share performance throughout the past year is pretty telling; the growth picture for SQ has recently taken a sizable hit. I believe that this is the same situation that we witnessed go down in Netflix (NFLX - Free Report) and Amazon (AMZN - Free Report) shares following their quarterly releases.
Additionally, with a forward earnings multiple in the triple digits, the stock is still displaying extremely rich valuation levels – even after shares have lost more than half of their value. As further seen with PayPal, the sentiment towards fintech stocks has undoubtedly shifted. I believe that investors should heed caution going into the quarterly release, especially with a slowdown in the growth picture and the current market environment.
SQ is currently a Zacks Rank #3 (Hold) with an overall VGM Score of a D.