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Block Soars on Surprise Profit & Upbeat Guidance: ETFs to Benefit
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On Feb 23, 2024, payments company Block (SQ - Free Report) delivered fourth-quarter 2023 adjusted earnings of 45 cents per share, which improved 104.5% year over year. However, the figure missed the Zacks Consensus Estimate by 22.4%. Net revenues of $5.77 billion surpassed the Zacks Consensus Estimate of $5.69 billion.
Block posted $2.03 billion in gross profit, up 22% from a year ago. Analysts tend to focus on gross profit as a more specific measurement of the company’s core transactional businesses, per CNBC. The company raised its adjusted EBITDA forecast to at least $2.63 billion from $2.40 billion. The top line increased 24% from the prior-year quarter. Shares surged 16% on Feb 23, reflecting earnings results.
Inside the Results
Block, formerly known as Square, ended the year with 56 million monthly transacting actives for Cash App in December, with most of those customers using it for either peer-to-peer payments or the Cash App Card. Its Cash App business’ $1.18 billion in gross profit saw 25% year-over-year growth. Its Cash App Card has 23 million monthly actives in December, up 20%. That is more than two times the growth rate of total monthly actives.
Guidance
For the first quarter of 2023, Block expects gross profit between $2.00 billion and $2.02 billion, suggesting year-over-year growth of 17%. Adjusted EBITDA for the first quarter is anticipated between $570 million and $590 million. Adjusted operating income for the first quarter is expected between $225 million and $245 million.
More Upside in Cards?
Currently, Block has a Zacks Rank #2 (Buy) with an upbeat Value-Growth-Momentum (VGM) score of A. Based on short-term price targets offered by 35 analysts, the average price target for Block comes to $80.89. The forecasts range from a low of $46.00 to a high of $110.00. The average price target represents an increase of 19.03% from the last closing price of $67.96.
Block currently has an average brokerage recommendation (ABR) of 1.67 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 40 brokerage firms. The current ABR compares to an ABR of 1.79 a month ago based on 39 recommendations.
Of the 40 recommendations deriving the current ABR, 26 are Strong Buy and three are Buy. Strong Buy and Buy respectively account for 65% and 7.5% of all recommendations. A month ago, Strong Buy made up 58.97%, while Buy represented 7.69%.
ETFs in Focus
Block has exposure to the below-mentioned ETFs. These ETFs should gain on Block’s robust outlook.
Image: Bigstock
Block Soars on Surprise Profit & Upbeat Guidance: ETFs to Benefit
On Feb 23, 2024, payments company Block (SQ - Free Report) delivered fourth-quarter 2023 adjusted earnings of 45 cents per share, which improved 104.5% year over year. However, the figure missed the Zacks Consensus Estimate by 22.4%. Net revenues of $5.77 billion surpassed the Zacks Consensus Estimate of $5.69 billion.
Block posted $2.03 billion in gross profit, up 22% from a year ago. Analysts tend to focus on gross profit as a more specific measurement of the company’s core transactional businesses, per CNBC. The company raised its adjusted EBITDA forecast to at least $2.63 billion from $2.40 billion. The top line increased 24% from the prior-year quarter. Shares surged 16% on Feb 23, reflecting earnings results.
Inside the Results
Block, formerly known as Square, ended the year with 56 million monthly transacting actives for Cash App in December, with most of those customers using it for either peer-to-peer payments or the Cash App Card. Its Cash App business’ $1.18 billion in gross profit saw 25% year-over-year growth. Its Cash App Card has 23 million monthly actives in December, up 20%. That is more than two times the growth rate of total monthly actives.
Guidance
For the first quarter of 2023, Block expects gross profit between $2.00 billion and $2.02 billion, suggesting year-over-year growth of 17%. Adjusted EBITDA for the first quarter is anticipated between $570 million and $590 million. Adjusted operating income for the first quarter is expected between $225 million and $245 million.
More Upside in Cards?
Currently, Block has a Zacks Rank #2 (Buy) with an upbeat Value-Growth-Momentum (VGM) score of A. Based on short-term price targets offered by 35 analysts, the average price target for Block comes to $80.89. The forecasts range from a low of $46.00 to a high of $110.00. The average price target represents an increase of 19.03% from the last closing price of $67.96.
Block currently has an average brokerage recommendation (ABR) of 1.67 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 40 brokerage firms. The current ABR compares to an ABR of 1.79 a month ago based on 39 recommendations.
Of the 40 recommendations deriving the current ABR, 26 are Strong Buy and three are Buy. Strong Buy and Buy respectively account for 65% and 7.5% of all recommendations. A month ago, Strong Buy made up 58.97%, while Buy represented 7.69%.
ETFs in Focus
Block has exposure to the below-mentioned ETFs. These ETFs should gain on Block’s robust outlook.
ARK Fintech Innovation ETF (ARKF - Free Report) – Block has 7.89% exposure
ARK Next Generation Internet ETF (ARKW - Free Report) – Block has 7.71% exposure
Grayscale Future of Finance ETF (GFOF - Free Report) – Block has 6.54% exposure
VanEck Digital Transformation ETF (DAPP - Free Report) – Block has 6.25% exposure
ARK Innovation ETF (ARKK - Free Report) – Block has 6.20% exposure