Block Stock Surges on Surprise Quarterly Profit and Guidance Beat—Key Level to Watch

Block, Inc.

Shares in Block (SQ) surged over 13% in after-hours trading following the payments fintech issuing a surprise quarterly profit and better-than-expected current-quarter and full-year outlook on expectations of growth in its Cash App business and benefits reaped from cost-cutting initiatives.

The Oakland, California-based company posted fourth-quarter net income of 2 cents per share, which compares to a loss of 93 cents a share in last year’s corresponding quarter. Analysts had expected the company to disclose a loss of 1 cent a share.

Total revenue for the period of $5.77 billion climbed 24% from a year earlier. Removing revenue generated from Bitcoin, the top line came in at $3.25 billion, representing a 15% year-over-year (YOY) increase. In particular, Square’s Cash App business performed strongly during the quarter, reporting a 20% YOY jump in non-Bitcoin revenue and had 56 million monthly transacting active users in the month of December, up 9% from a year before.

Looking ahead, the company said it projects adjusted earnings to range between $570 million and $590 million in the current quarter, with the lower end of that forecast coming in comfortably above analysts’ modeling at $511.76 million. For the full year, the company expects to generate an adjusted profit of $2.63 billion, above Wall Street’s expectation of $2.40 billion.

"We’ve done a lot recently to reduce our costs. Now we’re going to focus on growth," CEO Jack Dorsey wrote in the company’s Q4 2023 shareholder letter. Dorsey also noted that Square had reduced its headcount under 12,000, adding that he expects staffing to remain at current levels until it limits growth. In November last year, the company said it would implement a 12,000-employee cap, offload commercial real estate and automate some of its processes as part of broad cost-savings program.

In early January, the 50-day moving average crossed up above the 200-day moving average on the SQ chart to form a golden cross buy signal. More recently, the price has consolidated between the two closely-watched indicators in the lead-up to the company’s earnings report. If the stock continues to climb post earnings, it’s worth keeping an eye on the $80 level—an area that may provide resistance from a trendline connecting several prominent swing highs over the past 18 months. A volume-backed breakout above this key resistance region could potentially mark the start of a new trend higher.

Square shares gained 13.2% to $76.95 in after-hours trading.

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As of the date this article was written, the author does not own any of the above securities.