Block Inc. (NYSE: SQ) reported its fourth-quarter and full-year 2021 revenue and earnings results on Thursday, February 24, 2022, in which it topped Q4 earnings estimates and matched revenue estimates.
What to look for: The company changed its names in December last year from Square to block. Q4 earnings topped consensus estimates with revenue increasing 29.1% and marching estimates. Gross payment volume was increased during the quarter by 44.7% compared to last year. GPV is an important measure that tracks the total amount, net of refunds for all processed card payments by sellers using Block's payment system. The company charges transaction fees on gross payments, and the fees constitute the main revenue source for the company. Transaction-based revenue in Q4 2021 was $1.3 billion, with transaction-based gross profit increasing 39% from last year to $545 million.
Earnings: Stockearning’s Estimated EPS was $0.22, but the company topped the number with earnings of $0.27 per share. In the last quarter, the company missed estimates by 54.55% to post earnings of $0.05 per share against predicted EPS of $0.11. Historical EPS Performance for the past 12 quarters shows that the company has beat estimates ten times (83%) and missed twice (16%).
Revenue: The company reported revenue of $4.08 billion, beating estimates of $4.01 billion. Gross profit during the quarter was $1.18 billion, increasing 47% YoY. Bitcoin purchases revenue of $1.96 billion, accounting for almost half of the company's total quarterly sales. Net income minus some items was $140.4 million, topping analysts estimates of $115.1 million.
Stock movement: SQ shares have lost 64.1% since the company released its last earnings release. Interestingly, the company’s shares have been UP in the last 15 quarters following earnings releases out of 23 quarters. So, the historical price reaction suggests a 65% probability of the share price going UP following the earnings release. According to the Stockearning algorithm, the predicted volatility on the first day is +/-6%, while the predicted volatility on the seventh day is +/-8%.
What analysts are saying: Keybanc analyst Josh Beck slashed his price target in the stock from $225 to $175 and maintained a Buy rating in the shares ahead of the earnings release. According to the analyst, the report might be considered mixed overall, who sees Block as being in the initial phases of a third significant corporate evolution aimed at linking user and merchant networks across online and offline channels on a worldwide scale. Tough first quarter Cash App comparisons after last year's stimulus have resulted in relatively flat quarter-to-date trends and forecasts for the fully diluted EBITDA effect of Afterpay, according to his company's Key First Look statistics. On the plus side, Cash App was a definite stand out player in the latest KBCM FinTech Consumer survey, receiving top marks in "Buy Now, Pay Later," stock/crypto trading, checking consideration, and participatory approaches, while maintaining a #1 or #2 financial services standings in the app store, confirming his long-term status.
RBC Capital analyst Daniel Perlin slashed the company's price target from $203 to $147, reflecting valuation among payment/software peers. However, ahead of quarterly earnings this week, the analyst maintains a Buy rating on the stock, citing that with SQ currently selling at enterprise value nine-times projected gross margin vs. recent peaks of 27x, he feels that the expectation obstacle going into the release is low.
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