Shares of payments company Block (NYSE: SQ) jumped over 10% on Thursday following the announcement of an acquisition and strong quarterly results.
Results Beat Expectations
Block, formerly known as Square, reported first-quarter revenue of $3.96 billion, up 34% year over year and beating estimates of $3.3 billion. The company’s adjusted earnings per share came in at $0.41, more than double analyst forecasts of $0.17.
Block’s Cash App saw significant growth during the quarter. The app generated $462 million in bitcoin revenue, up more than tenfold from the prior year. Cash App also added 9 million monthly active users, reaching a total of 70 million.
Afterpay Acquisition
Block announced that it would acquire Australia’s Afterpay Limited in an all-stock deal valued at $29 billion. The buy now, pay later company complements Block’s Cash App business and will help it expand into the e-commerce payments space.
Analyst Reactions
Analysts were generally positive on the quarterly results and Afterpay deal. Mizuho Securities’ Dan Dolev called the deal “transformational.” Wedbush’s Moshe Katri said the acquisition “makes strategic sense.” However, some analysts cautioned that there were execution risks and questions about profitability.
Outlook and Challenges
Block sees significant opportunities from its acquisition of Afterpay. However, it faces competition from firms like Affirm, Klarna and PayPal’s “buy now, pay later” product. Block must also manage regulatory scrutiny of the buy now, pay later business model.
Block Stock Performance
Block’s share price jumped over 13% on Thursday following the news but pulled back slightly on Friday. Still, the stock sits near all-time highs and has gained over 150% in the last year. Block will likely see continued volatility as investors weigh the impact of the Afterpay deal and potential future growth opportunities.
In summary, Block delivered strong quarterly results, and its acquisition of Afterpay could position it for growth in the e-commerce payments arena. However, the company faces significant challenges in integrating Afterpay while managing competition and regulations.