Block stock jumps 18% after lower costs, engaged users drive Q3 earnings, outlook
hapabapa
Block (NYSE:SQ) stock surged 18% in Friday morning trading after the payment fintech company's progress in cutting costs and engaging its users cheered investors.
The company's gross profit beat the Street estimate on the strength of its Cash App and Seller systems, but was partly offset by lower Buy Now Pay Later gross profit, said Evercore ISI analyst David Togut, who has an underperform rating on the stock. Its adjusted EBITDA increased significantly due to lower-than-expected operating expenses, he added.
BTIG analyst Mark Palmer, with a Buy rating, sees a bright outlook for Block (SQ).
"Management noted that Cash App's gross profit growth during October was driven by growth in its MTUs (monthly transacting users) and monetization rate, while inflows per transacting active were flattish on a year-over-year basis," he wrote in a note to clients.
Cash App monthly active users were more than 49M in September, up ~20% Y/Y, and Cash App Card active users were up more than 40% Y/Y, Block (SQ) said in its shareholders' letter. Inflows per transacting active users were $1,046 in Q3, relatively stable vs. Q2 and Q3 2021, the company added.
Truist Securities analyst Andrew Jeffrey, who also has a Buy rating for Block (SQ), said the company is back on track. "It is our view that Block is building a durable alternative to traditional banking, tied to a leading software-integrated POS (point-of-sale system).
The Cash App and Square Seller systems, combined with its after-pay Buy Now Pay Later products differentiates the company from other POS software and neobank providers, Jeffrey said. We see SQ as one of FinTech's last relative safe havens and recommend investors add today.
He believes inflows/monthly active users can grow substantially "as the company lowers direct deposit friction, ramps cash deposit, and broadens its demographic appeal."
On Thursday, Block (SQ) turned in a big Q3 earnings beat, driven by Cash App and Square Seller