Block SQ is set to report its third-quarter 2024 results on Nov. 7.
The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $6.17 billion, indicating growth of 9.77% year over year.
The consensus mark for earnings is currently pegged at 88 cents per share, unchanged over the past 30 days. The figure indicates a 60% jump from the year-ago quarter’s reported figure.
Block’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, missing once, the earnings surprise being 15.52%, on average.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Block, Inc. Price and EPS Surprise
Block, Inc. price-eps-surprise | Block, Inc. Quote
Let’s see how things are shaping up prior to this announcement.
Key Factors to Consider for SQ’s Q3 Earnings
Block’s robust product portfolio has been a key factor in driving up Gross Payment Volume (GPV). In the third quarter of 2024, Block processed $61.94 billion of GPV, up 5% year over year.
Strength across the Square ecosystem on the back of its strong banking products and point-of-sale (POS) solutions are likely to have contributed well to GPV and transaction revenue growth in the to-be-reported quarter.
The Zacks Consensus Estimate for GPV is pegged at $63.579 billion, indicating a year-over-year rise of 5.8%. The consensus mark for transaction revenues stands at $1.754 billion, suggesting year-over-year growth of 5.7%.
SQ’s omnichannel offerings, which help sellers create differentiated customer experiences on the back of customer insights by managing orders from POS and eliminating manual aggregation of online and in-person orders, are adding strength to its seller base.
Growing momentum across the Square ecosystem and CashApp ecosystem, which enables Block to provide peer-to-peer payment and digital commercial transaction facilities, is another positive.
These factors are expected to have aided SQ’s top-line growth in the to-be-reported quarter.
The Zacks Consensus Estimate for subscription and services revenues is pegged at $1.795 billion, indicating year-over-year growth of 20.2%.
Block is likely to have sustained its momentum in the cryptocurrency space on the back of Cash App, which allows users to buy, sell, send and receive bitcoin.
The consensus mark for bitcoin revenues is pegged at $2.66 billion, indicating year-over-year growth of 9.9%.
However, weakening transaction activities on Cash App and increasing pricing pressure due to rising competition from PayPal in the peer-to-peer payments space do not bode well. SQ faces stiff competition from Affirm in the booming BNPL market.
Block Shares Underperform Sector, Industry
Block shares have declined 6%, underperforming the Zacks Business Services sector’s return of 14.4% and the Zacks Technology Services industry’s 32.8%.
Year-to-Date Performance Chart
Image Source: Zacks Investment Research
SQ stock is not so cheap, as the Value Score of C suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Sales ratio, Block is trading at 1.69X, higher than the industry’s 6.31X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
Strong Portfolio, Rich Partner Base Aids SQ’s Prospects
Block’s strong positioning in the digital payments industry on the back of its robust payment and point-of-sale (POS) solutions is a major driver. SQ’s comprehensive commerce ecosystem, which enables sellers to combine software, hardware, and payment services to accept payments from customers, helps it sustain solid momentum across sellers.
Its rich partner base, including Wix, Restaurant365, and Intuit INTU, has been a key catalyst. Block’s investments are aimed at scaling its distribution network. It inked multiple partnership agreements with large food distributors, including US Foods, in the second quarter of 2024.
SQ is expanding its footprint among beauty and wellness providers with new partner integrations, including SalonInteractive, Vish, Submatic, Pomp, SalconScale and Glammatic. It inked a distribution partnership with SalonCentric that will bring Square’s hardware and software offerings to more beauty professionals.
SQ’s Cash App and Lyft LYFT inked a partnership that will bring a customer-friendly new payment method to the latter’s customers. Cash App’s partnership with Alphabet’s GOOGL Google Play offers a preferred alternative payment option when checking out on their Android smartphones or tablets.
Block’s Afterpay division and strong partner base are boosting its prospects in the ‘buy now, pay later’ (BNPL) market. Its partnership with several brands, including Curology, Helzberg Diamonds, Journeys, Rawlings Sporting Goods, and Zenni Optical, is noteworthy. Afterpay also collaborated with various merchants, including Diane von Furstenberg, Diggs, For Eyes, and Kendra Scott, to offer installment payments for purchases from these merchants.
Block Shares - Buy, Sell or Hold?
Block’s strong portfolio offerings and an expanding partner base are key long-term drivers. Hence, investors who already own the stock should benefit from these drivers over the long haul.
However, challenging macroeconomic conditions, persistent inflation, unfavorable forex, and sluggish trends in consumer spending are concerning for SQ. A stretched valuation makes the stock a risky bet.
Currently, Block carries a Zacks Rank #3 (Hold), which implies that investors should wait for a better entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Research Chief Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners UpIntuit Inc. (INTU) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
Block, Inc. (SQ) : Free Stock Analysis Report
Lyft, Inc. (LYFT) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
