Block Re-Focuses On Cash App, 8 Analysts Provide Their Takeaways From Q4 Results

Block Inc SQ Thursday reported its fourth-quarter results and issued full-year guidance.

The results came amid an exciting earnings season. Here are some key analyst takeaways from the release.

• Keefe, Bruyette & Woods analyst Vasundhara Govil maintained a Market Perform rating, while raising the price target from $74 to $78.
• KeyBanc Capital Markets analyst Daniel Perlin reiterated an Outperform rating, while lifting the price target from $77 to $88.
• Piper Sandler analyst Kevin Barker reaffirmed an Overweight rating, while raising the price target from $86 to $88.
• Truist Securities analyst Andrew Jeffrey maintained a Buy rating, while lifting the price target from $90 to $100.
• Mizuho Securities analyst Dan Dolev reiterated a Buy rating and price target of $99.
• Wedbush analyst Moshe Katri reaffirmed an Outperform rating and price target of $90.
• Oppenheimer analyst Dominick Gabriele maintained a Perform rating on the stock.
• William Blair analyst Cristopher Kennedy reaffirmed a Market Perform rating on the stock.

Check out other analyst stock ratings.

Keefe, Bruyette & Woods: “SQ’s results reinforced the upside potential on operating leverage as the company is making solid progress on cost initiatives with potential for more,” Govil wrote in a note. “That said, as we expected, GP growth trends remain somewhat muted relative to expectations,” he added.

While seller gross payment value (GPV) growth decelerated by 2 percentage pints sequentially to 8% year-on-year growth in the fourth quarter, despite easier comps, management expects further deceleration in the first quarter, “in part owing to adverse impacts from weather in January (as seen across the industry),” the analyst further stated.

KeyBanc Capital Markets: Block delivered another beat on adjusted EBITDA, “reiterating its focus on profitability,” Perlin said.

“With last quarter laying the groundwork for profitability, this quarter focused investors on growth, specifically in Cash App,” the analyst wrote. He added that Block raised its full-year guidance for adjusted EBITDA and operating income from $2.4 billion to at least $2.63 billion and from $875 million to at least $1.15B, respectively.

Piper Sandler: Block reported its adjusted operating income for the fourth quarter ahead of expectations, although net revenue was “a little lighter than expected as GPV within Cash App slowed,” Barker said. “Gross margins were better than expected as SQ continued its focus on generating better margins, particularly through lower transaction expenses,” he added.

Block announced upbeat guidance “primarily due to continued focus on operating margins as SQ attempts to simplify the business,” the analyst further stated.

Truist Securities: "Block's renewed innovation, CEO, Jack Dorsey's, direct involvement and expense discipline set up SQ to regain category leadership,” Jeffrey wrote in a note.

“Simplifying Square onboarding and software intensity should drive share, in our opinion, and emphasis on direct deposit (DD) growth and feature enhancements will power better Cash App monetization and economic durability,” he added.
Mizuho Securities: Block reported “strong” fourth quarter results and upbeat 2024 guidance, Dolev said. “After a difficult 2023, the CEO's renewed focus on improving both the Square/POS and Cash App ecosystems should be well-received,” he added.

“We are encouraged by several initiatives the company is taking,” the analyst wrote. “With encouraging growth prospects, regained momentum in each core business, and strict cost controls, we expect 2024 to be a strong year for SQ,” he added.

Wedbush: Block reported a fourth-quarter beat, “led by CashApp, and more stringent financial discipline while SQ continues to lag, as management lays out ongoing initiatives to improve the segment’s performance,” Katri said.

“CY24 guidance (gross profit, adjusted EBITDA) also exceeded Street’s expectations as management clearly continues to conservatively invest in growing businesses,” he added.

Oppenheimer: "Full year 2024 guidance of GP growth of 15% YoY and $1.15B adjusted operating income and at least $2.63B of adjusted EBITDA,” Gabriele wrote.

“Guidance implies roughly 9% adjusted operating income margin expansion (roughly 3% better than previous company 2024 outlook) and 7% adjusted EBITDA margin expansion YoY,” she added.

William Blair: The fourth-quarter results exceeded expectations due to “tight cost controls,” Kennedy said.

“Management raised its 2024 adjusted EBITDA guidance by 10%, and affirmed its goal to be a Rule-of-40 company (versus Rule-of-29 in 2023) by 2026; the components of its target include at least midteens gross profit growth and mid-20% adjusted operating margins,” he added.

SQ Price Action: Shares of Block were up 16.5% to $79.13 at the time of publication Friday.

Now Read: Block Analyst Says Cash App Momentum Is 'Impressive,' Anticipates Major Upside From Expanding Banking Services

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