By Senad Karaahmetovic
Block Inc (NYSE:SQ) shares are trading almost 8% higher in premarket Friday after the digital payments company reported better-than-expected profit guidance for the full year.
Block reported a Q4 EPS of $0.22 on revenue of $4.65 billion, which compares to the average analyst estimate for a profit per share of $0.30 on revenue of $4.62B. Revenue increased 14% year-over-year as subscription & services-based revenue soared 70% to $1.31B.
Cash App - the company’s biggest revenue source - saw its sales come in at $2.86B, up 12% YoY and above the consensus of $2.73B.
“We delivered strong growth and profitability at scale during the fourth quarter of 2022,” the company said in a shareholder letter.
Block also introduced the FY23 guidance with adjusted EBITDA seen at $1.3B, above the $1.28 analyst estimate.
“Based on trends in our business year to date as of earnings, we expect adjusted EBITDA margin to expand by at least one percentage point year over year and adjusted operating income margin to also expand on a year-over-year basis in 2023 compared to 2022,” the company added.
Wolfe Research analysts hiked the price target on SQ stock to $95 per share from the prior $80 as EBITDA visibility is a “welcome sight.”
“SQ intends to hold its stated profit targets for 2023, suggesting the ability to flex its spending in the event that growth comes in slower than expected. We believe this may give investors a sense of increased visibility into future profitability, something that some have found to be uncertain at points prior to the print,” they said in a note.
KeyBanc analysts reiterated a Key Idea designation on Block after earnings.
“We modestly trim our estimates primarily to reflect discretionary segment headwinds that have cropped up in the Square seller business exiting 2022 yet remain OW as we believe the quality of growth in the Cash App business is improving (e.g., Cash Card GP rose to 26% of mix growing 56% y/y) and see drivers like rising direct deposit attach and new products (e.g., Borrow already scaled to >$100M GP run-rate following) as driving durable growth,” they wrote.