Block Inc (NYSE:SQ) hiked its guidance for the full fiscal 2024 on Thursday, sending its shares rising significantly in after-hours. Block stock continued attracting investor attention in Friday’s premarket and was up over 16% at the time of writing.
Block’s Q4 earnings
Jack Dorsey’s Block exceeded expectations in its fiscal Q4 report, driven by strong performance and increased monetization of its Cash App payment application.
The company reported an adjusted earnings per share (EPS) of $0.45 on revenue of $5.77 billion, surpassing the anticipated adjusted EPS of $0.67 on revenue of $5.71 billion.
Cash App was a significant contributor, generating $3.91 billion in revenue and $1.18 billion in gross profit, marking year-over-year increases of 31% and 25%, respectively.
The app's monetization rate improved to 1.48%, showing growth both on an annualized and sequential basis.
However, the highlight of the report was the upward revision of its full-year guidance for 2024.
The financial technology firm now forecasts an adjusted operating income of at least $1.15 billion, indicating a 13% margin, and an adjusted EBITDA of at least $2.63 billion, reflecting a 30% margin.
This represents a marked increase from the previous projections of $875 million for adjusted operating income and $2.4 billion for adjusted EBITDA.
For the first quarter, Block projects an adjusted operating income between $225 million and $245 million, and an adjusted EBITDA ranging from $570 million to $590 million.
Block stock forecast
In the aftermath of the report, Seaport’s senior analyst Jeff Cantwell upgraded Block stock to Buy from Neutral.
“SQ's progress over the past several months in terms of streamlining itself organizationally, sharpening its focus within its two key businesses Square and Cash App, and becoming hyper-focused on driving profitable growth has been impressive - and we think there's more to go,” the analyst wrote in a note.
Moreover, Seaport also raised its guidance for the company’s adjusted EBITDA for 2024 and 2025, while retaining the price target of $95. That implies an upside potential of nearly 40% from Block stock’s latest closing price.
Meanwhile, Wolfe Research analysts raised their target price on SQ to $95 from $85, anticipating additional growth potential, especially in the latter half of the year.
The broker expects Cash App's monthly active users (MAUs) to increase by about 1 million each quarter.
“We see upside to #'s particularly in 2H (primarily from Cash App) due to higher inflow/active and adoption of Direct Deposit, uptake of new product and features, and faster integration and scaling of Commerce,” analysts led by Darrin Peller noted.
Morgan Stanley analysts also gave a vote of confidence to Block stock, lifting the target price to $62 from $55.
The Wall Street giant SQ has a prime opportunity to leverage demographic trends to grow its financial services through Cash App, supported by the profitability of its Seller business.
However, they caution that the company’s potential could be at risk if it fails to accelerate growth in both the Square business and Cash App, especially if it cannot expand credit and banking services while operational expenses are decreasing.