Crypto effect, post-payment integration in focus

Mobile payments company Block (SQ) will report fourth quarter results after the close on Thursday with investors focused on the company’s integration of the Afterpay acquisition and the state of its crypto business.

Shares of the company formerly known as Square fell about 1% ahead of those results.

Here are the headline expectations for the company’s quarter, according to data from Bloomberg:

In the third quarter, Block reported revenue of $4.52 billion with gross profit totaling $1.57 billion, beating Wall Street expectations.

Block’s point-of-sale business, Square, which accounted for 45% of total gross profit last quarter, is expected to grow less than 1% in the fourth quarter, with profits expected to reach $790 million. In Q3, Square’s gross profit was $783 million.

Monthly active users for the Blocks Cash app are expected to grow to 51 million, up 14% from last year and 4% over the previous quarter. Cash App’s gross profit is expected to top Square’s for the first time since early 2021, with Wall Street estimating gross profit of $799 million for that business.

Analysts will also be keen for an update on the company’s crypto-related efforts and its continued integration of Afterpay, which it acquired for $29 billion in the summer of 2021.

“Not only has Afterpay underperformed, but we haven’t seen any measurable progress in terms of synergies. However, we still believe this deal can work and trends improved somewhat last quarter,” said Chris Brendler, senior equity analyst at DA Davidson on a Thursday. Note.

“We see potential for more encouraging trends in 4Q even as macro headwinds intensify,” he added.

DA Davidson has a Buy rating and a $130 price target on shares of Block.

In the third quarter, Cash App’s bitcoin business generated $37 million in gross profit on $1.76 billion in revenue, which represents the amount of bitcoin the company sold to customers during the quarter. In its third-quarter shareholder letter, Block said the decline in revenue and profit for its bitcoin business was driven by a drop in consumer demand and the price of bitcoin.

The story continues

Despite a strong start to the year for crypto markets, Thursday’s results will reflect the end of 2022 that saw crypto markets rocked by the rapid collapse of FTX.

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