Block: Anticipating Gross Profit Rebound And Margin Expansion From Strong GPV Growth In FY2025

Summary:

• Block (NYSE: SQ) delivered disappointing 3Q FY2024 results, missing revenue estimates and guiding for a weak margin in 4Q due to delayed cost benefits pushed into FY2025.
• A continued deceleration in GPV growth in 3Q was driven by weather and hurricane impacts but management anticipates a rebound in 4Q, with significant acceleration expected in FY2025.
• I expect YoY growth in gross profit and adjusted operating margin to improve in FY2025, potentially allowing SQ to achieve the Rule of 40 sooner than 2026.
• Trump’s reelection and potential deregulation in fintech, along with Bitcoin exposure, could provide a tailwind for SQ.
• SQ’s valuation remains attractive, with a non-GAAP P/E TTM of 23.8x, driven by 99.4% YoY EPS growth. The forward multiple is expected to drop to 18.2x, supported by 30.5% YoY.

A Mixed 3Q FY2024 Earnings

Block (NYSE:SQ) delivered mixed results for 3Q FY2024, triggering a negative market reaction in after-hours trading. The company missed revenue consensus due to weak gross payment volume (GPV), though its non-GAAP EPS was in-line with expectations. Specifically, GAAP

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