Investor's Playbook

📖Today’s Agenda

• Stock Market : Square Earnings Report Shows Mixed Results; Shares Climb on 2024 Outlook

• Entrepreneurship : TOP 3 AI TOOLS OF THE WEEK

📈Stock Market

Square Earnings Report Shows Mixed Results; Shares Climb on 2024 Outlook

Square-parent Block (SQ) reported fourth-quarter earnings that missed estimates while revenue slightly beat as other financial metrics were mixed. Guidance for SQ stock came in above expectations, sending shares up on Friday.

For 2024, Square forecast gross profit of at least $8.65 billion versus consensus at $8.55 billion. Square said it expects adjusted EBITDA of at least $2.65 billion versus consensus at $2.4 billion.

“Guidance implies roughly 9% adjusted operating income margin expansion (roughly 3% better than previous company 2024 outlook) and 7% adjusted EBITDA margin expansion year-over-year,” said Oppenheimer analyst Dominick Gabriele, in a report. “This significant margin expansion is likely the main driver of (the rally in Square stock).”

Block has told analysts it will cap its workforce size at 12,000.

SQ Stock: Q4 Financial Results

Released after the market close on Thursday, Square earnings for the period ended Dec. 31 were 45 cents per share on an adjusted basis, up 109% from the year-earlier period. Analysts had projected earnings of 58 cents a share.

Also, Square said net revenue came in at $5.77 billion, including Cash App transactions for bitcoin. SQ stock analysts had predicted revenue of $5.69 billion.

On the stock market today, SQ stock popped 17% to 79.53 in early action.

“Overall performance tracks to ‘balanced growth’ paired with rising profitability,” said Susquehanna analyst James Friedman in a report.

Block Stock: EBITDA Growth

Financial analysts also view gross profit as a key metric for SQ stock. Gross profit rose 22% to $2.03 billion, edging by estimates of $1.97 billion.

Cost-cutting boosted earnings before interest, taxes, depreciation and amortization, a key metric known as EBITDA. It jumped 28% to $562 million versus estimates of $447.3 million.

In Q4, gross payment volume from the transactions of merchant customers rose 10% to $57.8 billion, missing estimates of $58.50 billion.

For the first quarter of 2024, Square said it expects EBITDA of $580 million. Analysts had projected March-ending quarter EBITDA of $515 million.

Square Stock: Merchant Business

“Despite its commitment to a leaner cost structure, we think the top-line story is set to improve over the course of 2024 as product velocity ramps up and the re-focused go-to-market strategy bears fruit,” Jefferies analyst Trevor Williams said in a report.

SQ stock had retreated 13% in 2024 heading into the Block earnings report. San Francisco-based Block’s earnings included consumer lending firm Afterpay.

Further, Block in 2023 replaced the head of its merchant Square business, Alyssa Henry, with Block and Twitter founder Jack Dorsey.

In its core businesses, Square stock aims to build a two-sided digital payments ecosystem, with products designed for both merchant sellers and consumer buyers.

The Square Cash App helps individuals manage money, buy stocks and cryptocurrency, and more. Block aims to bridge the Cash App and merchant ecosystems with consumer financing services from Afterpay.

“Payments is becoming a smaller portion of Cash App revenue and banking revenue was stated to be a key driver of long-term Cash App growth and is expected to mix higher as a percentage of total Cash App gross profit over time,” said Oppenheimer’s Gabriele.

🎯Entrepreneurship

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