Block (NYSE:SQ) Stock Surges 12% as Fintech Company Aims to Expand Banking Services and Build Next-Generation Social Bank

In a thrilling turn of events, Block (NYSE:SQ) stock experienced a remarkable 12% surge in after-hours trading on Thursday. The fintech company made a game-changing announcement, revealing its plans to expand its business by enticing Cash App users to bank with them. Block also aims to move up the market and cater to families, while simultaneously constructing the next-generation social bank.

Block’s CEO, Jack Dorsey, emphasized the company’s dedication to growth within the United States. He emphasized their focus on driving growth through inflows per active user, rather than the number of active users themselves. This strategic approach highlights their commitment to building a solid foundation for their services.

Encouragingly, Block now projects a full-year 2024 adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of at least $2.63 billion. This estimate surpasses the Visible Alpha consensus of $2.41 billion while also exceeding Block’s previous guidance of $2.40 billion. Additionally, their initial 2024 guidance anticipates a gross profit of at least $8.65 billion, reflecting a minimum 15% year-on-year growth.

Looking closer, the company’s Q1 2024 expectations bring further excitement. Block anticipates adjusted EBITDA in the range of $570 million to $590 million, surpassing the $562 million achieved in Q4 2023. Furthermore, their projected gross profit stands at $2.00 billion to $2.02 billion, slightly lower than the prior quarter but still substantial when compared with Q4 2022.

While Q4 gross payment volume slightly missed the Visible Alpha estimate, coming in at $57.5 billion, it still demonstrated growth from previous years. In fact, this volume experienced an increase from $53.2 billion in Q4 2022, emphasizing the company’s trajectory.

In terms of earnings per share, Block’s Q4 adjusted EPS landed at $0.46. While this figure fell short of the average analyst estimate of $0.57, it showcased growth from the prior quarter ($0.55) and incredible improvement from the same period the previous year ($0.22).

Block’s Q4 total net revenue of $5.77 billion surpassed the $5.71 billion consensus, illustrating remarkable progress. Excluding bitcoin, their revenue experienced an impressive 15% year-on-year increase, reaching $3.25 billion. Furthermore, transaction-based revenue rose by 8% year-on-year, although slightly lower than the previous quarter’s growth of 9%.

The Cash App, a significant element of Block’s ecosystem, boasted 56 million monthly transacting actives by the end of December 2023. This figure marked a slight increase from the previous quarter, highlighting the growing popularity of the app. Remarkably, inflows per transacting active users reached $1,137, signifying an impressive 8% year-on-year growth. Additionally, Cash App generated a noteworthy $66 million in bitcoin gross profit, experiencing a staggering 90% year-on-year increase. Notably, bitcoin revenue rose by 37%, reaching $2.52 billion.

Within the Square ecosystem, Q4 generated $1.81 billion in revenue, a slight decrease from the previous quarter but still showing significant growth compared to Q4 2022. Square’s gross profit witnessed a decline to $827 million, compared to $899 million in the preceding quarter. However, it remains considerably higher than the $703 million recorded a year ago.

In terms of expenses, Block reported Q4 non-GAAP operating expenses of $1.48 billion, reflecting an increase from both the prior quarter and the same period in 2022. Despite this, the company’s adjusted EBITDA for Q4 reached an impressive $562 million, surpassing the Visible Alpha estimate of $514.9 million. This upward trend showcases the consistent growth that Block has been able to achieve over time.

To provide further insight into these exciting developments, Block held a conference call at 5:00 PM ET. Additionally, it is worth noting that Block’s GAAP EPS (Earnings Per Share) of $0.45 fell short by $0.12, while their revenue of $5.77 billion exceeded expectations by $60 million.

Overall, Block’s exceptional performance in various aspects of their business highlights the company’s dedication to growth and innovation. Their commitment to expanding and capturing the lucrative U.S. market, coupled with their focus on driving growth through active user inflows, positions them as an industry leader. With their ambitious plans for the future, Block is well on its way to revolutionizing the fintech landscape.

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