Block (ASX:SQ2) share price jumps 10% on strong 2022 third quarter

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The Block Inc (ASX: SQ2) share price is up more 10% after revealing its quarterly update.

Block is the parent business behind payments business Square and it recently acquired the buy now, pay later company Afterpay.

Block’s 2022 Q3 highlights

The ASX share revealed that in the third quarter, it generated gross profit of $1.57 billion, which was an increase of 38% year on year.

Its cash app generated gross profit of $774 million, up 51% year on year. Square generated a gross profit of $783 million, which was an increase of 29% year on year.

The above numbers compare to the second quarter of 2022 when it made $705 million of gross profit with the cash app and $755 million of gross profit with Square.

Block reported that it made $327 million of adjusted EBITDA (EBITDA explained). That represents a 40% rise year over year and a 75% increase compared to the second quarter of 2022.

In terms of the net income/loss, which essentially represents the net profit/loss after tax (NPAT) figure, Block reported that it made a net loss of $15 million for the quarter. While this was worse than the $0 net result it was in the third quarter of 2021, it was much improved from $209 million loss in the second quarter and $204 million loss in the first quarter.

Other positive commentary

Block reported that its cash app card has “significant momentum” and has scaled to more than 35% of its monthly actives. In September there were “nearly 18 million cash app card actives”, up more than 40% year on year, with weekly and daily actives “increasing at an even more rapid rate during the same period.”

It also noted that in the third quarter, Square for restaurants, Square for retail and Square appointments cumulatively grew gross profit more than 45% year on year.

Final thoughts on the Block share price

The Block share price is down around 33% over the past six months. Is it good value today after the interest rate has gone up so much? I think it’s hard to say. The gross profit continues to grow, but it’s not making big net profit yet.

The shift to digital payments continues, which should help the business. But, the higher interest rate probably doesn’t help Afterpay’s economics and a weakening economy could hurt the growth rate of Square (and Afterpay).

I think Block can continue to grow in scale, but there may be even better opportunities after the sell-off this year when looking at all the ASX growth shares.



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