Jack Dorsey, co-founder and CEO of Twitter Inc. Square Inc., listens during the Bitcoin 2021 conference in Miami, Florida, on Friday, June 4, 2021.
Eva Marie Uzcategui | Bloomberg | Getty Images
roadblock The stock closed up 16% on Friday, a day after the payments company reported fourth-quarter earnings that beat analysts' estimates for gross profit and showed strong growth in Square and Cash App revenue.
Here's how the company did, compared to the consensus of analysts from LSEG, formerly known as Refinitiv:
Earnings per share: 45 cents adjusted, not comparable to estimates Revenue: $5.77 billion vs. $5.70 billion expected
Block reported $2.03 billion in gross profits, up 22% from last year. Analysts tend to focus on gross profit as a more accurate measure of a company's core transactional business.
The company raised its revised earnings before interest, taxes, depreciation and amortization forecast to at least $2.63 billion from $2.40 billion.
Block, formerly known as Square, ended the year with 56 million monthly Cash App transaction activity in December, with most of those customers using either peer-to-peer payments or a Cash App Card.
Its Cash App business reported gross revenue of $1.18 billion, an increase of 25% year over year.
The company, run by Jack Dorsey, said the Cash App Card had 23 million monthly activities in December, up 20%. This is more than double the growth rate of total monthly activities.
“We believe this strategy will enable us to build the largest network over the long term, with a very active customer base that uses Cash App as their primary banking solution,” Dorsey said in a note to shareholders.
The payments company has focused on reducing operations in recent months. In January, Block's CEO reportedly said in a memo to employees that the company had laid off a “significant number” of workers. This came after another round of layoffs in December.
The company is now below the previously set cap of 12,000 employees, Dorsey said in his note to shareholders.
“We will operate under this roof until we feel it is holding us back, which is likely to happen years later,” Dorsey wrote. The company recorded a $70 million charge for severance costs.
The company also took a $132 million decline from its investment in music streaming service Tidal. Block and Dorsey have had a mixed record in closing deals. The company sold its delivery service Caviar to DoorDash in 2019 in a cash-and-stock deal worth $410 million. It also acquired Afterpay in 2021 for $29 billion, its largest acquisition ever.
Afterpay has struggled since the deal was announced, posting consecutive quarters of losses throughout 2022. Dorsey said in his note to shareholders that integrating Afterpay more tightly into Cash App and using it to power Cash App's buy now, pay later technology was a focus for them. 2024.
Block's strong quarterly results and full-year outlook prompted Wall Street analysts to raise their rating on the stock on Friday.
Wells Fargo upgraded Block to overweight and raised its price target from $65 to $95, while Seaport Research Partners upgraded the stock to buy and also raised its price target to $95.
“The progress SQ has made over the past few months in terms of streamlining itself organizationally, increasing its focus in its two core businesses Square and Cash App, and hyper-focusing on driving profitable growth has been impressive,” Seaport Research Partners analysts wrote. “We think there is further to go.”
— CNBC's Michael Bloom, Rohan Goswami, Alex Kohler and Kate Rooney contributed to this report.
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