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Square Stock Rises On Cash App Outlook As Earnings Top Estimates

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Square-parent Block (SQ) reported December-quarter earnings, net revenue and gross payment volume that topped analyst estimates, despite slowing growth for consumer Cash App services. SQ stock jumped on Friday amid limited guidance for the acquisition of Afterpay.

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San Francisco-based Block reported fourth-quarter earnings late Thursday. Square stock jumped 15.8% to near 110 before the market open on the stock market today.

Cash App had 44 million active monthly users at the end of December, up from 40 million in June, the company said. Cash App growth slowed less than expected in the fourth quarter.

“Despite consternation heading in, Cash App gross profit of $518 million, up 37% year-over-year, was 2% ahead of the street,” said Jefferies analyst Trevor Williams in a report.

SQ Stock: Cash App Outlook

At Susquehanna Financial, analyst James Friedman said in a report: “Looking to Q1, 2022, Cash numbers look better than feared.”

He added: “Fears that Cash App users would not outlast stimulus checks seem to have been overblown as user and engagement metrics look strong. Gross profit per monthly active grew 13% year-over-year to $47 in the fourth quarter.”

Square earnings came in at 27 cents per adjusted share, down 15% from 32 cents in the year-earlier period. Analysts had projected earnings of 23 cents a share.

Gross profit increased 47% to $1.18 billion vs. estimates of $1.16 billion, the company said.

Square said net revenue jumped 62% to $4.42 billion, boosted by Cash App transactions for digital cryptocurrency Bitcoin. Analysts had predicted revenue of $4.04 billion.

Square Stock: Gross Payment Volume Meets Views

Adjusted revenue rose 54% to $1.4 billion, topping estimates of $1.34 billion. Gross payment volume from merchant customers rose 92% to $46.3 billion, in line with estimates. But gross payment volume growth is expected to slow in the March quarter.

Square said earnings before interest, taxes, depreciation and amortization, known as EBITDA, came in at $184 million vs. estimates of $143 million.

Square on Jan. 31 closed the acquisition of Australia-based consumer lending startup Afterpay. Announced on Aug. 1, the deal was originally valued at $29 billion. With the big drop in Block stock, the deal was valued at less than $15 billion at closing.

Afterpay competes in the emerging “buy now, pay later” market that encroaches on credit card networks.

“Management gave some color around Afterpay, but left many details out in anticipation of their investor day in May,” said RBC Capital analyst Daniel Perlman in a report. “Management noted the significance of Afterpay to the omnichannel strategy, enabling Square to serve customers with the large global merchants.”

At Keybanc Capital Markets, analyst Josh Beck commented: “Afterpay synergies were an earnings call focus, with early achievements including day-one online merchant/BNPL integration and 100,000 Cash App leads to Afterpay merchants with a compelling vision to unite the consumer/seller ecosystems across channels and countries.”

Heading into Square’s earnings report, the stock had a Relative Strength Rating of only 5 out of a best-possible 99, according to IBD Stock Checkup.

Square stock has retreated 58% over the last three months.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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