To The Moon

Block Earnings Preview: Performance is Expected to Improve with Payment Growth and Bitcoin Price Recovery

$Block, Inc.(XYZ)$   is a company that integrates payment, financial, and blockchain technologies to provide a one-stop financial services solution for businesses and individuals.

Block's merchant services, which are the company's traditional core business, primarily offer payment processing, business management tools, and financial services to merchants through the Square platform.

The company's consumer services are mainly provided through the Cash App platform, a personal financial services application under Block. Users can conduct fast money transfers and access services such as Bitcoin trading, stock trading, savings accounts, and debit card services. Additionally, Block offers Buy Now, Pay Later (BNPL) services that allow users to make purchases on installment plans.

Based on the Q3 2024 revenue, Bitcoin income accounted for the largest share of total revenue at 40.64% ($24.29 billion), followed by subscription and service income at 30.09%, transaction income at 28.66%, and hardware income at 0.62%.

The company's stock rose 9.88% in 2024. As of February 14, 2025, the stock has fallen 1.16% YTD.

Block is scheduled to release its Q4 2024 financial results post-market on February 20 ET. According to S&P Global forecasts, Block is expected to report revenue of $6.26 billion for Q4 2024, representing an 8.44% increase year-over-year. The company's earnings per share (EPS) are projected to be $0.41, up 45.79% from the same period last year. As of February 14, 2025, 85.71% of analysts have given the stock a "buy" rating, with an average target price of $107.4, indicating a potential upside of 27.86%.

Here are some notable earnings estimates:

In Q3 2024, Block reported revenue of $5.976 billion, a year-over-year increase of 6%. The company achieved a net income of $281 million in the third quarter, compared to a net loss of $93.5 million in the same period last year, marking a significant turnaround. Adjusted EBITDA reached $807 million, up 69% year-over-year.

Block's Q4 2024 financial report will continue to focus on the resilience of its payment business, the revenue rebound driven by a substantial increase in Bitcoin prices in Q4, and the effectiveness of cost control. Despite market disagreements over its 2025 guidance, Block's long-term appeal remains strong, thanks to its ecosystem integration in the fintech space and the implementation of AI technologies.

In terms of payment business, payment transaction volumes from the Cash App and Square ecosystems are expected to maintain steady growth, with Q4 growth rates projected to be between 12% and 15%. For subscription and service revenues, driven by the development of Cash App memberships and Afterpay installment services, Q4 is expected to contribute over $2 billion in revenue, up 25% year-over-year.

Bitcoin price rebound drives revenue growth

In Q3 2024, the increase in Bitcoin prices boosted Bitcoin trading revenue on Cash App. Bitcoin-related revenue reached $2.429 billion, a slight increase from $2.426 billion in the same period last year. Bitcoin prices surged by 47.41% in Q4 2024, compared to a mere 0.92% increase in Q3. The significant price rise in Q4 over Q3 is expected to contribute substantially to the company's Bitcoin revenue.

Coinbase's Q4 financial report showed an increase in Bitcoin trading volume and revenue, which could be a positive indicator for Block's Cash App Bitcoin trading business. The increase in Coinbase's revenue suggests that Block may also benefit from its Bitcoin-related services.

As of Q3 2024, Block held 8,363 Bitcoins. With the sharp increase in Bitcoin prices, the total value of the company's Bitcoin holdings has also been rising significantly.

Square Terminal Upgrades Enhance Merchant Appeal

In 2024, Square significantly upgraded its terminal devices, integrating AI capabilities and more efficient payment processing features. These include intelligent order management, predictive inventory management, and voice-ordering technology—features that are particularly favored by the foodservice and retail industries. Surveys indicate that 98% of foodservice merchants believe AI technology can help address labor shortages, especially in food preparation and delivery management.

The upgraded Square terminals support multiple payment methods, such as chip cards, contactless payments, and traditional magnetic stripe cards, and come with a robust offline mode, making them an ideal choice for small and medium-sized merchants. They also support the expansion of non-core business services, including subscription services, events, and food delivery, which further attract the adoption by small and medium-sized merchants.

These upgrades are designed to enhance merchant operational efficiency and user experience. Due to the improved functionality and increased merchant adoption resulting from the terminal upgrades, Square’s merchant services revenue is expected to grow by over 10% in Q4 2024.

Cash App Ecosystem Deepening Enhances User Transaction Frequency

Cash App has continuously deepened its ecosystem, thereby increasing user stickiness and transaction frequency. As of the end of Q3 2024, the monthly active transaction volume on Cash App reached 57 million, a year-over-year increase of 6%. Although user growth has slowed, the usage frequency and stickiness of existing users have steadily improved.

Users of Cash App can apply for a Cash Card linked to their account, which functions like a debit card and can be used for purchases worldwide. As of 2024, the issuance of Cash App Cards has surpassed 50 million.

By integrating Buy Now, Pay Later (BNPL) services, Cash App has significantly increased user transaction frequency. BNPL services allow users to pay for purchases in installments. This not only enhances users' purchasing power but also helps merchants expand their customer base, improve conversion rates, and increase sales.

Analyst Forecasts

According to analyst predictions, KeyBanc has given Block a "buy" rating with a target price of $120, while BofA Securities also issued a "buy" rating with a target price of $115. Bernstein likewise assigned a "buy" rating, setting a target price of $120.

Citigroup has warned that Block's 2025 earnings guidance could face downward revisions due to potential underperformance in M&A integration, particularly with acquisitions like GRI. Investors should closely monitor the management's progress in integrating these acquisitions. If Q4 revenue and EPS both exceed expectations and the 2025 profit guidance is raised, the stock price could break through the $100 mark.

Meanwhile, Block is currently facing multiple securities class-action lawsuits and regulatory investigations, primarily concerning compliance issues on its Square and Cash App platforms. Although the company has reached a settlement with the CFPB, other lawsuits are still ongoing, and investors should pay attention to further developments.

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