Here’s why the Block (ASX:SQ2) share price is rocketing 35% today

The Block Inc CDI (ASX: SQ2) share price has rocketed in morning trade after the business announced its FY21 results overnight.

Published February 25, 2022

Lachlan Buur-Jensen

Lachlan is a Bachelor of Commerce graduate with majors in Accounting and Finance from Monash University. He invests in companies with intense customer love, strongly aligned management teams and structural tailwinds. Lachlan is a big proponent of the eighth wonder of the world – compound returns, and its power in helping individuals reach financial freedom. Outside of investing, Lachlan enjoys supporting his AFL team – Essendon. Albeit, this can be frustrating at the best of times.

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The Block Inc CDI (ASX: SQ2) share price has rocketed today after the business announced its FY21 results overnight.

In early afternoon trade, the Block share price is up 34.77% to $156.40.

Block? Afterpay? Square?

Block, formerly known as Square, is a global payments business with divisions including Square, Cash App, Spiral, TIDAL and TBD54566975.

The company also bought Australian buy now, pay later market darling Afterpay in January.

Block share price soars after beating expectations

Key financial results for the year ending 31 December include:

Revenue of US$17.66 billion, an increase of 86% year-on-year (YoY)
Gross profit of US$4.42 billion, up 62% YoY
Adjusted EBITDA of US$1.01 billion, up 114% YoY
Net income of US$166 million, down 22% YoY

The strong financial results were primarily driven by growth in Cash App and Square’s merchant base.

Block benefitted from the maturation of the prior year’s customer and merchant cohorts.

“We have seen strength in retention during recent years, with annual gross profit retention of greater than 125% for each of the past four years”

In simple terms, customers use and spend with the platform more each year.

This leads to growth in Block’s revenue and earnings before any contribution from new customers.

Cash App

Cash App is a digital bank account that allows customers to send and receive money, buy shares and trade cryptocurrency.

The division increased monthly transaction users to 44 million, a 22% increase on the prior year.

Customers were attracted by new features such as being able to lodge your tax return and transfer cryptocurrency for free.

Square

Square provides products and facilitates payments for merchants. You’ll recognise Square by the little white bricks that customers tap their card on.

The division’s merchant base increased its total transaction volumes by 45%, for which Block takes a clip of each transaction.

Square merchants are increasingly more engaged. Around 38% of current merchants use four or more of Square’s products, up from 10% five years ago.

What’s next for the Block share price?

The Block share price will be supported by the addition of Afterpay as of 1 February 2022.

“Together, we intend to enable Square sellers of all sizes to offer BNPL at checkout, offer Afterpay consumers the ability to manage their installment payments directly in Cash App, and give Cash App customers the ability to discover sellers and BNPL offers directly within the app”

The business has also continued its positive growth momentum from 2021 into January and February.

Square transaction value is up 35%. Meanwhile, Cash App’s gross profit is forecasted to increase, driven by transactions, customer engagement and deposits.

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Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, Lachlan does not have a financial or commercial interest in any of the companies or funds mentioned.

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Here’s why the Block (ASX:SQ2) share price is rocketing 35% today

Lachlan Buur-Jensen

Block? Afterpay? Square?

Block share price soars after beating expectations

Cash App

Square

What’s next for the Block share price?

$50,000 per year in passive income from shares? Yes, please!

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