Block Inc. (SQ) is set to report fiscal 2024 fourth quarter results on February 22nd. Wall Street expects revenue growth of 22.7% year-over-year to $5.71 billion, with EPS forecast to jump 159% to $0.57.
Img Credit: – Popular Fintech
Several developments create optimism around Block’s growth trajectory:
- The recent global rollout of Block’s Bitkey self-custody bitcoin wallet expands its addressable cryptocurrency market. Bitkey enables secure direct management of bitcoin holdings.
- Block saw a 14% annual increase in Black Friday/Cyber Monday transactions to 70 million. Higher in-person (up 15%) and online (3.9X larger cart sizes) activity points to greater transaction volumes and fees.
However, Block faces risks around:
- Financial results last quarter missed estimates slightly, with net loss and per share net loss widening 80% and 150% respectively.
- Profitability lags sector averages, with lower margins for gross profit, EBITDA, levered free cash flow and capex as a percentage of sales.
- Valuation is mixed compared to industry peers. Forward P/E and EV/EBITDA multiples exceed benchmarks significantly, suggesting potential overvaluation, while forward EV/Sales and P/S trade at discounts.
In summary, Block enjoys positive secular growth trends in digital payments and crypto adoption. But questions around financial performance, profitability and valuation signal a “wait and see” approach may be prudent for investors until after Block delivers its next earnings report.
