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Block (SQ) was founded in 2009 and has become a global company specializing in payment solutions and financial services. It is known for products such as Cash App, which enables quick and easy financial transactions, and Square, a point-of-sale solution for businesses.
- Highlights in 2023
1. Annual guidance :
Block raised its guidance for fiscal year 2024, with expectations of adjusted revenue of at least $1.15 billion and adjusted EBITDA of at least $2.63 billion. This positive revision led to a significant increase in the share price following the announcement.
2. Sales for the quarter :
Block reported quarterly sales of $5.96 billion, up 19.38% on the same period last year. This solid performance was largely due to the continued growth of Cash App, which generated $3.91 billion in revenues.
3. Product performance :
The Cash App saw an improvement in its monetization rate to 1.48%, with a 31% increase in annual revenues and a 25% increase in gross profit.
4. Performance versus Wall Street expectations :
Block's quarterly results exceeded analysts' expectations, with adjusted earnings per share of $0.85 against an estimate of $0.62, and revenues of $5.96 billion against a forecast of $5.75 billion.
- Why is this a stock to watch?
Block continues to innovate and grow, particularly with Cash App, which is undergoing rapid expansion and improved monetization. Its ability to exceed expectations and revise upwards its revenue and earnings forecasts testifies to its financial robustness and future growth potential. In addition, heightened investor interest and optimistic analyst forecasts reinforce the share's appeal.
- Conclusion
At Pratte Gestion de Portefeuille, we firmly believe in Block's potential. The company has proven that it can not only meet market expectations, but exceed them through constant innovation and solid growth. Having Block in our portfolio was a wise decision, and we remain optimistic about its future prospects. We will continue to monitor the stock closely, confident that Block will continue to deliver value to our investors. The stock has accumulated gains of 27% over the past six months.
Market Brief
Monday
Dow: The index fell by 0.21% to close at 39,431.51 points.
NASDAQ: The index gained 0.29% to close at 16,388.24 points.
S&P 500: The broad index edged down 0.02% to close at 5,221.42 points.
The Dow Jones Industrial Average retreated slightly on Monday, ending an eight-day run of gains, as brokers faced rising inflation expectations ahead of key reports later in the week. A New York Federal Reserve survey showed that consumers have recently raised their expectations for both short- and long-term price increases. One-year inflation expectations rose to 3.3%, and five-year forecasts reached 2.8%.
The session was also marked by mixed trading, with the NASDAQ up while the Dow ended its eight-day winning streak. Even a spectacular rise in "meme" stocks like GameStop and AMC Entertainment, which posted intraday gains of over 100% after Keith Gill's return to social media, wasn't enough to propel the Dow to a ninth consecutive day of gains.
- Stockss in brief
GameStop (+74.52%): Strong renewed interest after the return of an influential trader.
AMC (+79.73%): Benefits from the same dynamic as GameStop.
Alibaba (+5.68%): Positive expectations ahead of quarterly results announcement.
Home Depot (-1.57%): Cautious wait for results.
Arm Holding (+7.71%): Announcement of a new division for AI chips.
Microsoft (+2.34%): Continued rise after last week's strong quarterly results.
Tesla (-3.45%): Continued decline due to concerns about demand in China.
Meta (+1.89%): Growth thanks to the announcement of a new augmented reality feature for its users.
Tuesday
Dow: The index rose 0.32% to close at 39,558.11 points.
NASDAQ: The index gained 0.75% to close at 16,511.18 points.
S&P 500: The broad index gained 0.48% to close at 5,246.68 points.
Investors reacted to producer price index (PPI) data for April, which rose by 0.5%, exceeding economists' expectations of 0.3%. Although this initially provoked a negative market reaction, the downward revision of March's figures eased concerns about persistent inflation. Markets remain focused on Wednesday's Consumer Price Index (CPI) report, which is expected to show an increase of 0.4% for April.
- Stockss in brief
Nvidia (+3.2%): Announcement of new partnerships in artificial intelligence.
Apple (+2.5%): Optimistic sales forecasts for next quarter.
GameStop (+62.40%): Strong rise following Keith Gill's return to social networking.
AMC (+32.76%): Benefiting from GameStop's momentum and fundraising.
Tesla (+3.29%): Benefits from the imposition of additional customs duties on Chinese technology products.
Alphabet (+0.60%): Up despite an investigation into its Waymo autonomous cabs.
Ford (+4.09%): Up after a favorable analysts' note.
Meta (+1.09%): Despite a record fine of 1.2 billion euros imposed by the Irish regulator for infringement of European data protection rules.
Chevron (-1.81%): The oil group announced the purchase of PDC Energy for $6.3 billion.
Nike (-3.97%): Analysts downgrade the stock after Foot Locker results.
- Renewed interest in viral actions
The last two sessions have seen a marked resurgence in interest in "viral" stocks. GameStop and AMC Entertainment, two of the stocks emblematic of this movement, posted spectacular gains, driven by specific factors and renewed interest from retail investors.
GameStop climbed 62.40% to close at $49.45. This impressive jump was triggered by the return to social networks of Keith Gill, known by the pseudonym "Roaring Kitty". Gill had been a central figure in GameStop's 2021 surge, fueled by discussions on Reddit and other online platforms. His return rekindled the interest of small investors, generating a new wave of speculation on the stock.
AMC followed a similar trajectory, climbing 32.76%. In addition to the knock-on effect of GameStop, AMC also benefited from raising $250 million through the sale of new shares. This capital increase is viewed positively by investors, as it strengthens the company's financial position and gives it the means to overcome current economic challenges. The same applies to BlackBerry shares (+11.61%), which, as in 2021, followed the wave of speculation that began on social networks.
The renewed interest in viral stocks has also had wider effects on the market, increasing volatility and drawing attention to the potential for high returns associated with these speculative stocks. However, this dynamic is also accompanied by considerable risks, with price fluctuations often unpredictable and strongly influenced by social trends rather than underlying economic performance.
Wednesday
Dow: The index rose by 0.88% to close at 39,908 points.
NASDAQ: The index gained 1.40% to close at 16,742.39 points.
S&P 500: The broad index gained 1.17% to close at 5308.15 points.
The S&P 500 and NASDAQ hit new record highs, building on their strong performances of 2024. Year-to-date, this is the 23rd record close for the S&P 500, the 18th for the Dow and the 8th for the NASDAQ. The main indices were boosted by a weaker-than-expected report on consumer inflation in the United States. The consumer price index (CPI) rose by 0.3% in April, less than the 0.4% expected by analysts. Over 12 months, inflation slowed to 3.4%, from 3.5% previously, marking the first decline since January. This news sent bond yields tumbling, with the ten-year yield falling to 4.34% from 4.43% the previous day.
Retail sales stagnated in April, whereas analysts were expecting an increase of 0.4%. This indicates that consumers are feeling the extra cost of high interest rates, which could help curb inflation. Prospects of rate cuts by the Federal Reserve have been reinforced, fuelling investor optimism.
- Speculative frenzy at GameStop and AMC
The speculative frenzy over shares in video game store GameStop and movie theater AMC deflated after three days. GameStop fell 18.79% to $39.59 and AMC lost 20% to $5.48 after spectacular surges in which the shares almost doubled.
- Stockss in brief
Dell (+11.23%): Announcement of an innovative new laptop.
Nio (-8%): Impacted by new US tariffs on Chinese electric vehicles.
McDonald's (+1.21%): Gains after the announcement of a new five-dollar meal to attract more customers.
Qualcomm (+2.98%): Up thanks to new product announcements.
Intel (+0.71%): Benefits from competitive innovations in the sector.
Nvidia (+3.58%): Up sharply thanks to increased interest in semiconductors.
AMD (+4.25%): Benefiting from positive momentum in the semiconductor sector.
Taiwan Semiconductor Manufacturing (+2.36%): Investor appreciation for semiconductors.
Apple (+1.22%): Purchases supported by forecasts of rate cuts.
Alphabet (+1.13%): Up with the technology sector as a whole.
Microsoft (+1.75%): Solid performance thanks to expectations of rate cuts.
Boeing (-2.03%): Impacted by criticism from the US government.
Thursday
Dow: The index fell by 0.10% to close at 39,869.38 points.
NASDAQ: The index fell 0.26% to close at 16,698.32 points.
S&P 500: The broad index lost 0.21% to close at 5,297.10 points.
The Dow Jones Industrial Average briefly surpassed 40,000 points for the first time, reaching 40,051.05 before closing slightly lower. The Dow gained nearly 6% in 2024, fueled by strong earnings and expectations of interest rate cuts. During this consolidation session, the Dow was supported by Walmart, which gained 6.99% thanks to better-than-expected quarterly results. The retail chain benefited from a surge in e-commerce and strong sales growth among high-income customers, enabling it to raise its annual targets.
There was no major catalyst today, and at these historic levels, a pause was healthy for the indices. The economic indicators released confirm a slowdown in the US economy. Industrial production was flat in April, and the Philadelphia area manufacturing activity index fell to 4.5 points. Building permits reached their lowest level since December 2022.
Despite these signs of deterioration, the market is interpreting the slowdowns as positive, seeing them as reasons for the Fed to lower rates later this year. The bond market also caught its breath, with the yield on 10-year US government bonds reaching 4.37%.
- Stockss in brief
Walmart (+6.99%): Quarterly results better than expected and full-year forecasts raised.
Boeing (+3.37%): Optimism ahead of Annual General Meeting despite operational challenges.
Meta (-1.73%): Profit-taking after recent gains.
Amazon (-1.27%): Decline in the wake of other tech giants.
Deere (-4.73%): Downward revision of annual earnings forecasts.
Cisco (-2.68%): Decline despite positive results, margins expected to contract slightly.
Friday
Dow: The index was up 0.1% at mid-session.
NASDAQ: The index was also up 0.1% in late morning trading.
S&P 500: The broad index gained 0.1%.
Despite a weak end to the session on Thursday, the indices are set to close the week higher. The NASDAQ leads the way with a 2.2% advance, followed by the S&P 500 with a 1.4% rise and the Dow Jones with a 0.9% increase. This weekly advance helps all three indices to enter positive territory for the second quarter.
Shares in GameStop (-20%) fell sharply after the company announced its intention to sell up to $50 million worth of shares. This decision was accompanied by a report showing a 10% drop in first-quarter sales, which caused concern among investors and led to a significant fall in the share price.
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