Monday saw Jack Dorsey’s Block Inc. (XYZ) fall 12.9% to a four-month low of $108.09 after the Afterpay owner reported weak fourth-quarter earnings on Friday:
- The number of active users of the Cash App was relatively flat at 57m, up just 2% YoY.
- The growth in their Cash App Card solution was also slower than hoped.
- Revenue of $US6.03bn was less than the consensus $US6.28bn.
- Net Profit surged to $US1.95bn, from $US1.02bn in the year-earlier over the same period.
The digital payments company endured its steepest decline since the outbreak of COVID with more benign user growth on cash a negative standout, especially for a stock that had more than doubled in just over 12 months and was priced for an acceleration in growth, not the opposite. Simply put, the result was ok, but as we’re repeatedly witnessing, that’s not good enough in today’s market. The stock will struggle in the coming months without a fresh catalyst; hence, it’s not for us.
- We added XYZ to our Active Growth Portfolio’s Hitlist last week, but following its disappointing report, we’ve now removed it.
MM is now neutral towards XYZ
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