Friday saw a roughly 16% increase in shares of Block (SQ.N. ), reaching their highest level since mid-September. This surge came after analysts praised the payments company for its increased focus on profitability and its $1 billion stock repurchase plan.
The focus on cost containment and profitability was consistent with remarks made earlier this week by larger peer PayPal Holdings (PYPL.O), which stated that it would become “leaner” to spur growth.
The two companies’ strong projections have helped investors’ confidence in the industry recover after a decline in European and American payments equities last week due to Worldline’s (WLN.PA), a French fintech behemoth, pessimistic outlook.
Based on the stock’s most recent trading price of $51.35, Block increased its market worth by almost $4 billion following CEO Jack Dorsey’s promise to maintain an “absolute cap” on personnel count growth until company expansion overtook headcount growth.
“While CEO Jack Dorsey has talked about greater discipline when it comes to profitability, we’ve seen little actual progress and we like that the company is now providing discrete profitability targets,” Brett Horn, a Morningstar analyst, said.
Above LSEG projections of $2.08 billion, the business projected its adjusted profits before interest, taxes, depreciation, and amortization (EBITDA) of $2.4 billion on Thursday.
The street yells back, but worries endure. Block revealed a proposal to buy back $1 billion worth of shares, which Dorsey claimed would assist the business in offsetting some of the erosion from employee share-based pay.
However, a few analysts maintained their skepticism, pointing to concerns about the company’s capacity to increase profitability, particularly as competitors continue to eat into market share.
“We remain on the sidelines considering growth moderation, with the merchant segment likely losing share to Clover and Cash App’s monetization, which seems to be stalling,” Moshe Katri, a Wedbush analyst, stated.
Fiserv (FI.N.), a provider of payment services, is the company that runs Clover and has increased its projected yearly earnings.
