Block Stocks Drop as Cash App Parent Takes A ‘Cautious Approach’ Due To Economy

Takeaways

• Block said because of the dynamic economic environment, it was taking a 'more cautious stance' in its guidance.
• The Square and Cash App payment systems operator predicted that gross profit for current quarter and the full year would be below estimates.
• Block also missed the forecasts of first-quarter sales and profit.

Block (XYZ), a payments technology provider, posted results and guidance that were worse than expected. It also warned about the economic conditions to come.

Visible Alpha surveyed analysts and found that the operator of Square and Cash App reported a first quarter adjusted profit per share of $0.56. This was well below the $0.92 expected by analysts. Revenue also fell 3% to $5.77bn, missing expectations. 

Gross profit increased by 9%, to $2.29 Billion. Payment volume increased by 4.4%, to $56.80 Billion. They were also below expectations.

The results were dragged by falling bitcoin revenue, which slid 16% to $2.30 billion, and CEO Jack Dorsey explained that Cash App didn't perform as anticipated as the company "saw changes to consumer spending as the quarter progressed that we believe drove the majority of our forecast miss."

Block’s Q2, FY gross profit is below expectations

COO and CFO Amrita Ahuja added that "we're operating in a more dynamic macro environment, so we've reflected a more cautious stance on the macro backdrop into our guidance."

Block estimates a current-quarter profit of $2.45bn and a full-year profit of $9.96bn. Visible Alpha estimated $2.54 billion in gross profit and $10.18 billion in total for the current quarter.

Block shares fell to their lowest level for almost a year-and-a-half.