Hgo in Block of (SQ) Fourth quarter earnings report, it was feared the company was following in the footsteps of other digital payment contenders and delivering a below-average display. These fears appeared unfounded after the company delivered the goods and reported that the company’s flagship offering, the Cash app, is doing very well.
Revenue rose 29.1% year over year to $4.08 billion, in turn beating the street call of $20 million. Ultimately, non-GAAP EPS of $0.27 exceeded the consensus estimate of $0.05.
Gross profit rose 47% to $1.18 billion from analysts’ forecast of $1.16 billion and breaking the decelerating trend that has rocked the company in recent quarters, gross profit of Cash App eventually re-accelerated sequentially, reaching $518 million.
It’s an important development, says Dan Dolev of Mizuho, but it’s by no means the highlight of the report.
“The 1Q guide was the defining moment of the call,” says Dolev, who believes management’s comment that, on a two-year CAGR basis, App Cash grew 71% over the January and February and should “further improve” in March, sent the stock price higher following the call. Ultimately, this suggests that Cash App‘s gross profit could reach $550 million in the first quarter.
But that’s not all. Given recent product launches such as Cash App Pay, Family and Taxes, for the rest of 2022 the company sees even more “momentum”. “All of this should lead to an acceleration in 2 hours,” notes the analyst.
Additionally, there could be another catalyst looming; the company will host an analyst day on May 18. “History indicates that the 2017 Analyst Day was a good catalyst, as the stock more than doubled in the six months following the event,” Dolev said optimistically.
This is therefore a buy from analyst Mizuho, who also maintains a price target of $210, suggesting the stock could rise 121% over the coming year. (To see Dolev’s track record, Click here)
Most analysts agree; on the basis of 21 purchases versus 2 purchases, the stock benefits from a consensual strong buy rating. The average target of $208.83 is just a little below Dolev’s target. (See analysis of block stocks on TipRanks)
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