Published - May 06, 2022 @ 05:01 PM (EET)

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Block (NYSE:SQ) shares were rising early Friday after the payments company said gross profit from its Cash App rose 26% and that overall consumer spending through April had not seen a decline.

The upward move of 5% came even though the digital payment services company reported a weaker-than-expected adjusted profit and saw its net income swing to a loss during the first quarter of 2022.

Revenue in the quarter was nearly $4 billion, down from $5.1 billion a year earlier, while Block cited a decrease in Bitcoin earnings for the shortfall.  Excluding Bitcoin, total net revenue in the first quarter would have risen 44% to $2.23 billion.

The bitcoin revenue decline was primarily driven by relative stability in the price of bitcoin during the quarter, Block said, which reduced customer demand and trading activity compared with the comparable period a year earlier.

Gross profit surged 34% year-over-year to $1.29 billion, with Cash App generating $624 million, while the Square ecosystem generated $661 million.

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Elsewhere, Block closed its $29 billion acquisition of Australian buy-now-pay-later pioneer Afterpay Ltd during the quarter, which contributed $92 million to the first quarter's gross profit.

The earnings were recorded under the Square and Cash app units.

"We expect Cash App and Square to sequentially grow gross profit each quarter throughout the year, even excluding Afterpay, assuming the macroeconomic environment remains stable." - Chief Financial Officer Amrita Ahuja.

Adjusted earnings of $0.18 per share came in lower than analysts' estimates of $0.24 and was also a much lower figure than the prior year's comparative figure of $0.41 per share. 

Operating earnings, or otherwise EBITDA, were recorded at $195 million, ahead of Street estimates of $136 million, according to IBES data from Refinitiv.

WALL STREET'S TAKE

In response to Block's quarterly results, analyst Dan Dolev of Mizuho Securities maintained a Buy rating on the stock, with a price target of $215, implying an upside potential of 125% to current levels.

Block Inc. rose 5.8% to $101.05 in premarket trading following the Q1 earnings results.

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