Shares of the fintech Block rose in after-hours trading Thursday after the payments company beat first-quarter revenue forecasts, driven by mobile payment platform Cash App.
Total net revenue for the first quarter was $4.99 billion, up 26% year-on-year. Gross profit increased 32% to $1.71 billion, or 27% year-over-year on a company-combined basis.
Block (Stock ticker: SQ) also reported an operating loss of $6 million, adjusted operating income of $51 million, and a net loss for the quarter of $17 million, or 40 cents per share.
Analysts polled by FactSet expected the company led by Twitter co-founder and former CEO Jack Dorsey to report earnings of 35 cents per share on revenue of $4.6 billion.
Block said the total revenue of its mobile payments platform Cash App grew 49% from a year ago, to $931 million. Gross profit for the POS system increased 16% to $770 million year-over-year.
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The company said that the Cash App’s monthly card activity increased 34% to 20 million in March, and that their average spending also increased.
For the full year 2023, Block raised its adjusted EBITDA to $1.36 billion, up from $1.3 billion previously.
The results appear to be enough to satisfy investors in the company — which includes mobile payment platform Cash app, Square point-of-sale system, and “buy now, play later” service Afterpay. After closing 1.9% higher on Thursday, Block shares rose 2% in the after-hours session.
Investors saw Block shares take a hit this year after a critical report from a short seller. The stock is down 3.8% in 2023, compared to a gain of 5.8% in 2023
Standard & Poor’s 500
The index jumped 14% in tech-heavy
NASDAQ Composite.
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There’s been a lot of downside for Block stock since March 23 — before that the stock was up 16% year-to-date — when Hindenburg Research unveiled a short-term deal and published a cash report on the company. The short deal is one that is effectively betting on stocks, and Hindenburg claimed Block had inflated user metrics and failed to curb illicit activity by customers on its cash app platform.
Block countered the allegations, first by saying that she would explore legal action against Hindenburg, and then by issuing a detailed refutation. In a statement, the company laid out verified user numbers and emphasized its rigorous approach to risk and compliance.
Investors shouldn’t expect the headwinds from the Hindenburg allegations, which have split Wall Street and prompted a number of downgrades by analysts, to slow. While fundamental metrics from Block’s earnings will be key when the company releases results, expect questions — and perhaps new discoveries — as analysts will almost certainly benefit from the earnings conference call to manage the roast.
Block also faces increased competition from PayPal (PYPL) and the Apple Pay program (AAPL). In addition, Bank of America (BAC), JPMorgan Chase (JPM), and five other major banks behind payments network Zelle plan to launch a digital wallet this year. If the digital wallet is integrated into services already offered to existing bank customers, they can choose to use Zelle’s product via Block or
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PayPal by simply clicking or clicking on the option when making online purchases.
Write to Jack Denton at jack.denton@barrons.com and Janet H. Cho at janet.cho@dowjones.com
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