Block Inc (NYSE:SQ) shares tumbled more than 10% before Friday’s opening bell as the company’s fourth quarter earnings fell short of Wall Street expectations.
The financial services and digital payments firm, formerly known as Square, reported earnings per share of $0.71. This marked a 51% year-over-year improvement but missed estimates of $0.88.
Revenue increased 4% from the year-ago quarter to $6.03 billion, below estimates of $6.28 billion.
Gross payment volume from merchant transactions was up 10% at $61.95 billion, topping estimates of $61.3 billion.
Analysts at Jefferies highlighted Block’s ambitious growth targets for 2024, with management forecasting an increase in gross profit from 11% in Q1 to 18% in Q4. While they noted that some may view this with skepticism, they are optimistic.
“Key drivers of the acceleration were explicitly outlined, which we believe have good visibility, and we left confident that go-to-market changes in Square will work,” they wrote in a note to clients.
Marketing spend for Square surged 60% year-over-year in Q4, and early indicators suggest strong returns, they noted.
Partner-led sales are also gaining traction, with sellers averaging over $1 million in volume, reinforcing confidence in Square’s ability to move upmarket. Additionally, Block is preparing to onboard its first ISO partner in the US, further strengthening its market reach.
The analysts also noted that Cash App Q1 growth is projected to slow in Q1 due to a Leap Year effect and Bitcoin-related revenue shifts but is expected to gain momentum later in the year. The company plans to expand its Borrow product, increase BNPL adoption on Cash Card, and boost marketing efforts to drive user engagement and revenue.
Though total monthly active users (MAUs) are expected to remain flat year-over-year, analysts believe average revenue per user (ARPU) will be the key driver of Cash App’s growth in 2025.
Jefferies repeated its ‘Buy’ rating on Block and awarded it a $110 price target.
Shares of Block traded down 10.6% at about $74 shortly before Friday’s opening bell in New York.