Block Adjusted Earnings Could Rise on Cash App Performance

Cash App inflows and new offerings could offset industry headwinds

Cropped shot of a young man using a Square payment device to charge a female customer at his stall at the farmers' market.

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Key Takeaways

  • Block is seen reporting fourth-quarter adjusted EPS of $0.34 vs. $0.27 in the prior-year quarter.
  • Revenue probably climbed 13.2% to $4.6 billion.
  • Payments companies like Block face headwinds from inflation and the interest rate hikes central banks have taken up to fight it.
  • Block's Cash App service, one of its main revenue streams, increased inflows in recent months.

Block Inc. (SQ), whose Cash App is among the world's top 10 payment apps, will likely report a sixth consecutive quarter of net losses for the final three months of 2022, even as adjusted earnings rose amid an increase in Cash App use.

Block will probably say its net loss narrowed to $73.2 million, while adjusted earnings per share (EPS) increased by almost 30% to $0.34, according to estimates compiled by Visible Alpha. Revenue likely rose 13.2% to $4.6 billion. Block reports results after markets close on Feb. 23.

Block and competitors Paypal and Stripe saw transaction volume surge along with e-commerce in 2020 and 2021. The global payments industry's lofty growth expectations were brought back down to earth last year by decades-high inflation rates and the subsequent global campaign of central bank rate hikes. Analysts expect the industry's headwinds to persist in 2023.

Square's Cash App service could report increased inflows as it pushes further into consumer banking. In September alone, more than $2 billion was deposited directly into Cash App accounts. The company sees direct deposits as one way to increase the number of purchases and stock or cryptocurrency trades made through the app, and drive adoption of its banking products, like the Cash App Card.

In the last quarter of 2022, Square launched a monthly payment option through its Afterpay service, providing users short-term financing for purchases through a buy now, pay later product. The company paired the launch with retail partnerships in an effort to capitalize on the holiday spending rush. Retail sales were weak in the final months of the year, and customers relied increasingly on credit for purchases.

Block shares have dropped 22% in the last year, compared with a 10% fall for the S&P 500 Information Technology Index.

One-Year Total Return for S&P 500 Information Technology Index and Block
Source: TradingView.
Block Key Stats
  Estimate for Q4 FY 2022 Actual for Q4 FY 2021 Actual for Q4 FY 2020
Adjusted Earnings Per Share ($) 0.34 0.27 0.32
Revenue ($B) 4.6 4.1 3.2
Gross Payment Volume ($B) 54.8 46.3 32.0

Source: Visible Alpha

The Key Metric: Gross Payment Volume

Block's gross payment volume (GPV) is a key metric tracking the total dollar amount, net of refunds, of all card payments processed by sellers using the company's payments ecosystem. It includes peer-to-peer payments as well as transactions with merchants that use Block's mobile payments app. Because Block charges transaction fees on those payments, the greater the GPV, the more transaction-based revenue the company is able to generate.

Analysts expect Block's GPV to climb 18% to $54.8 billion, its highest-ever level, for the final quarter of 2022.

Article Sources
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  1. Wall Street Journal. "Cash App Gets the Money."

  2. Visible Alpha. "Financial Data."

  3. "Mobile Payments App Revenue and Usage Statistics (2022)."

  4. Block Inc. "Block Fourth Quarter 2022 Earnings Call."

  5. ReportFinder. "Payments Global Market Report 2023."

  6. Block Inc. "Q3 2022 Shareholder Letter." Page 4.

  7. Zacks. "Block (SQ) to Release Q4 Earnings: What's in the Cards?"

  8. Yahoo! Finance. "Survey: Almost Half of Consumers Used Credit Cards for Holiday Spending."

  9. Block Inc. "Form 10-K for the Fiscal Year Ended December 31, 2021," Page 52.

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