Block earnings beat estimates, but SQ stock down on reduced GPV growth

Block (SQ) shares are trading down 6.7% at $83.70 after Thursday evening's earnings beat. The reason for the sell-off is simply because management said gross payment volume (GPV) for the Square ecosystem would grow by 18% in July compared to 29% YoY in April. This appeared to be a harsher slowdown in growth than many expected.

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Still, Block posted adjusted earnings per share of $0.18, which beat analyst consensus by 2 cents. Also, revenue came in at $4.41 billion, $80 million above expectations.

Block stock earnings news

Despite beating on top and bottom lines, Block's figures were lower than the period one year ago. Revenue was down nearly 6% YoY, and the $0.18 in adjusted EPS was way off the $0.66 achieved one year ago. Block brought in $1.48 billion in transaction-based revenue, a 20% YoY increase. Gross profit from these transactions was $600 million, a 10% YoY increase.

Chairman and co-founder Jack Dorsey focused his statements in the earnings call on connecting customers from one segment of the business, such as CashApp, to other segments of the larger ecosystem such as the Buy Now Pay Later option Afterpay, which was acquired last year. "In Cash App, we're just starting to bring Afterpay's discovery capabilities into our ecosystem," Dorsey said. "The greatest combined opportunity we see is in commerce. Afterpay will introduce discovery and shopping to build on the elements that Cash App has already created around commerce, like Cash App Pay and Boost."

Second-quarter gross payment volume of $52.5 billion was a leap above the $43.5 billion in Q1 2022 and from $42.8 billion in the year-ago quarter.

"Square generated $755 million of gross profit in the second quarter, an increase of 29% year-over-year and 30% on a three-year CAGR basis," said Amrita Ahuja, chief financial officer. "Excluding $75 million of gross profit from our BNPL platform, Square gross profit was $681 million, up 16% year-over-year and 25% on a three-year CAGR basis."

Block stock forecast

SQ stock's 1.9% advance in Thursday's regular session led the fintech player right up to resistance at $90. This area stems from the second half of May. Since SQ stock could not break through the high from that period of $90.99, the market will likely send it down to find support. The 9-day moving average currently sits at $77.33, and the 21-day moving average at $71.87. Additionally, the ascending bottom trend line will assuredly hold around $70.

There will not be much interesting action in SQ stock until it breaks through the $91 barrier and heads to its next source of resistance at $107.21. The Moving Average Convergence Divergence (MACD) indicator shows that there is a willingness for a sustained rally at some point.

SQ daily chart