Block Stock Soars in Response to Q4 Earnings
Block, traded as SQ, witnessed a remarkable surge of over 20% following the announcement of its fourth-quarter results. CEO Jack Dorsey expressed satisfaction with the company’s cost reduction efforts and declared a strategic pivot towards growth. Despite falling short of consensus EPS estimates by 23.73%, Block surprised analysts with a 1.28% revenue beat.
The Bright Outlook According to Analyst Tien-tsin Huang
The Block Analyst: JPMorgan’s Tien-tsin Huang, CFA, maintains an optimistic outlook on Block, awarding the stock an Overweight rating alongside a $90 per share price target. This projection suggests a potential upside of 32.45% from the current stock price of $67.96 per share.
The Block Thesis: Huang’s analysis underscores Block’s strong post-Q4 earnings prospects. Notably, the company outperformed expectations in EBITDA for both Q4 and the upcoming FY24, achieving a 22% increase in gross profit and a 28% margin. Cash App, in particular, excelled with a 25% growth in gross profit, targeting a vital role in the primary banking function for households earning up to $150,000 annually.
Huang’s revised forecast for FY24 anticipates a gross profit growth exceeding 15%, aligning with the expectations of investors. The analyst exhibits confidence in Block’s trajectory by raising the FY24 EBITDA estimate by 6%.
Expanding Banking Services and Innovative Initiatives
One of the significant drivers behind Block’s future success, as highlighted by Huang, is Cash App’s expansion into user banking services and its venture into establishing a next-generation social bank. The analyst expressed admiration for the remarkable momentum within Cash App, underscoring the importance of monitoring key data points as Cash App continues to bridge any product gaps.
In addition to its banking endeavors, Block is actively exploring avant-garde strategies such as the “pay-as-you-go” model and bundled restaurant offerings. These innovative tactics serve as potential catalysts for the company’s future growth trajectory.
Final Thoughts: A Promising Future for Block
In conclusion, Huang’s evaluation underscores Block’s adept cost management, the robust growth of Cash App, a positive forward outlook, and a commitment to ongoing innovation. With a favorable valuation and strategic positioning in the ever-evolving fintech landscape, Block emerges as a promising contender poised for significant growth and innovation.
SQ Price Action: As of Friday’s publication, Block stock surged by 21.34% to reach $82.46.
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