Parent company Block (XYZ) recently released its third-quarter earnings, showcasing a mix of outcomes that elicited a bearish response in the market. Despite beating earnings expectations, the numbers for revenue and several key financial indicators fell short of analyst forecasts, leading to a more than 9% drop in Square’s stock price in after-hours trading.
For the quarter ending September 30, the company reported earnings of 74 cents per share on an adjusted basis, a notable increase of over 60% year-over-year. However, net revenue amounted to $6.11 billion—accounting for Bitcoin transactions—marking only a 2% increase from the previous year, while analysts had forecasted revenue of $6.31 billion.
### Financial Highlights
A closer look at key financial metrics reveals a mixed performance. Gross profit rose 18% to $2.66 billion, slightly surpassing the projected $2.60 billion. However, adjusted operating income fell short of expectations at $409 million compared to the anticipated $473 million. Earnings before interest, taxes, depreciation, and amortization (EBITDA) also faced a setback, rising just 3% to $833 million against analyst predictions of $840 million.
On a positive note, gross payment volume from merchant customers experienced a healthy rise of 12%, totaling $67.15 billion and exceeding estimates of $66.3 billion. Looking ahead, Block forecasts gross profit for the current quarter ending in December to be approximately $2.755 billion, which signifies a 19% growth and slightly beats the expected $2.725 billion.
### Market Response and Business Model
The immediate market reaction to these earnings was negative, with Square stocks dipping to $64.48 after the announcement. Prior to this report, the stock had already been on a downward trend, having lost roughly 17% since the start of the year.
Square continues to operate a robust two-sided digital payments network tailored for both merchants and consumers. This ecosystem is further enhanced by the inclusion of Afterpay, a consumer lending service. Additionally, the Square Cash App has expanded its offerings, enabling users to manage finances, invest in stocks, and trade cryptocurrencies, with a newly introduced feature allowing groups to split payments seamlessly.
### Technical Analysis
From a technical perspective, Square stock currently holds a Composite Rating of 63 out of a possible 99, which assesses various metrics to gauge a stock’s growth potential. An ideal Composite Rating typically falls at or above 90. Additionally, the Accumulation/Distribution Rating stands at D-plus, indicating weaker performance in price and volume trends over the past few months.
In summary, while Block’s third-quarter earnings showcased resilience in certain areas, several key metrics are raising concerns among investors. Monitoring upcoming strategies and overall market conditions will be crucial for evaluating the company’s future performance.
