How is the Block share price rocketing 17% on Friday?

The Block Inc (ASX: SQ2) share price is off to the races today.

Shares in the global S&P/ASX 200 Index (ASX: XJO) buy now, pay later (BNPL) stock – which acquired Afterpay in January 2022 – closed yesterday trading for $101.23. At the time of writing in late morning trade on Friday, shares are swapping hands for $118.10 apiece, up 16.7%.

For some context, the ASX 200 is up 0.6% at this same time.

Investors are bidding up the ASX BNPL share following the release of its fourth-quarter results (Q4 2023).

Here’s why. (Note, all figures are in US dollars.)

Block share price soars on profit surge

• Net revenue of $5.77 billion, up 24% year on year
• Gross profit of $2.03 billion, up 22% from in Q4 2022
• Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of $562 million, up 100% year on year
• $7.7 billion in available liquidity as at 31 December

What else happened with Block over the quarter?

Of the $2.03 billion in gross profit, Square generated a gross profit of $828 million, up 18% year on year. Meanwhile, the company’s Cash App generated gross profit of $1.18 billion, up 25% year on year.

Also helping the Block share price is the rising Bitcoin (CRYPTO: BTC) price. The company reported a Bitcoin gross profit of $66 million in Q4 2023, up 90% from Q4 2022. The total sale amount of Bitcoin sold to customers (Bitcoin revenue) was $2.52 billion.

Block reported a quarterly operating loss of $131 million, a slight improvement from the $135 million operating loss in Q4 2022. Adjusted quarterly operating income of $185 million was up year on year from a loss of $32 million.

And Block has been tapping into generative AI to boost productivity. Q4 saw the company launch a GenAI conversational tool for its customer-facing teams to improve efficiency.

Over the full 2023 calendar year, Block reported gross profit of $7.50 billion, up 25% from 2022.

What did management say?

Commenting on the results sending the Block share price rocketing today, CEO Jack Dorsey said:

We’ve done a lot recently to reduce our costs. Now we’re going to focus on growth.

We’re under our 12,000 people cap. This constraint forces us to prioritize more impactful work, which we believe will lead to growth. We’re going to operate under this cap until we feel it’s holding us back, which is likely years out, and continue to look critically at our organization and priorities.

On the topic of people, we’re reorganising the people in Square back to a simple Engineering/Product/Design/Sales structure.

What’s next?

Looking at what might impact the Block share price in the year ahead, the company offered some strong guidance for 2024.

Over the full year, Block forecasts gross profit of “at least” $8.65 billion. That’s up 15%, or more, from 2023.

Block forecasts adjusted operating income of “at least” $1.15 billion for a 13% margin.

And adjusted EBITDA is expected to come in at “at least” $2.63 billion, for a 30% margin.

Block share price snapshot

With today’s big intraday surge factored in, the Block share price is up 7% in 12 months.

The ASX 200 BNPL stock has gained a whopping 93% since the recent 31 October lows.

The post How is the Block share price rocketing 17% on Friday? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• 6 oversold ASX shares to buy in February 2024
• Why Block, Resolute Mining, Sayona Mining, and Syrah shares are sinking today
• Here are the top 10 ASX 200 shares today
• Are ASX growth shares back? How these fundies delivered over 20% upside in 2023

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin and Block. The Motley Fool Australia has positions in and has recommended Block. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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