For two years, Block (SQ) traded in a range of between $40 - $80. This is nowhere near the $260 - $300 range from 2021-22. Fortunately, its robust outlook may send SQ stock on a sustained uptrend in 2024.
In the fourth quarter, Block posted non-GAAP earnings of 45 cents a share. Revenue increased by 24.1% Y/Y to $5.77 billion. The company impressed shareholders with the 24% Y/Y growth in subscription and service-based revenue. In addition, gross profit from that segment rose by 27%.
SQ stock popped by 16% on Feb. 23. Unusually, PayPal (PYPL) posted decent results but shares fell from $65 to around $57. Markets are wary of PayPal’s growth prospects. The fintech is global and operates in over 30 countries. Block, on the other hand, is in around five countries. Its recent quarterly strength suggests that Block will grow its addressable market. This would justify its higher valuation.
Block issued an upward forward guidance, which companies must do to attract investors. PayPal reported weaker customer activity and expects slow acquisition growth. Fintech investors are wary of holding a position in a company that does not have growth. Without it, PYPL stock does not offer value.
Your Takeaway
SQ stock already enjoyed a post-earnings rally. Investors who missed it may wait for shares to pull back first. Shares trade at two times sales and nearly three times its book value. Look for the stock to re-test the trading range in the $65 - $70 level.
