Financial services firm Block (NYSE:SQ) stock has fallen (-59%) into the toilet for 2022. The e-commerce processing and payments platform subsidiary Square expanded its services through acquisition and integrated them into its wildly popular Cash App mobile payment service.
The Bitcoin Lightning Network was added to the Cash App enabling more access and flexibility to its digital wallets. The Company makes a transaction fee as well as the spread for Bitcoin, which accounted for nearly half of its Q1 2021 revenues when Bitcoin was riding high. Wall Street loved Block over PayPal (NASDAQ:PYPL) during the height of the crypto bull market but has turned 180 degrees in sentiment.
The collapse of cryptocurrency markets have trashed Bitcoin revenues as they fell (-51%) to $1.73 billion in fiscal Q1 2022 causing total Q1 2022 revenues to tank (-21.7%). While so much of Bitcoin's price action is tied to Block's fate, the Company has also been integrating its Afterpay buy-now-pay-later (BNPL) acquisition.
Afterpay contributed to the subscription and service-based revenues growing 72% to $960 million in the quarter. Markets may be pegging too much of Bitcoin's price action to Block's share price. Shares are still trading above pandemic lows but could revisit there if Bitcoin doesn't find a floor at $20,000. Prudent investors that believe Bitcoin can rise from the ashes in the second half of the year and the Company can still grow its other segments like Afterpay can watch for opportunistic pullbacks in shares of Block.
Q1 2022 Earnings Report
On May 5, 2022, Block reported its Q1 2022 earnings for the quarter ended March 2022. The Company reported earnings-per-share (EPS) profits of $0.18 falling short of consensus analyst estimates for $0.20, missing by (-$0.02). Revenues fell 21.7% year-over-year (YoY) to $3.96 billion falling short or the $4.14 billion consensus analyst estimates.
Bitcoin revenues tanked (-51%) to $1.73 billion. Transaction based revenues rose 28% to $1.23 billion for a gross profit of $514 million, up 19% YoY. The Company processed $43.5 billion in GPV, up 31%. Subscription and services grew 72% YoY to $960 million with a gross profit of $764 million, up 63% including contributions from Afterpay. The Company acquired GoParrot, a digital ordering and marketing platform for restaurants.
Conference Call Takeaways
Block CEO Jack Dorsey touted the progress of Cash App in four areas including Cash App for Families, Trust, Afterpay and Bitcoin. The Cash App added FDIC insurance in April 2022 on all accounts with Cash App card. Afterpay is being integrated with Cash App driving more than 35,000 leads to Afterpay sellers in the quarter.
Bitcoin access through Cash App has enabled over 10,000 account to buy Bitcoin and added the ability to send and receive Bitcoin through the Lightning network. The addition enables Bitcoin transactions to complete instantly rather than waiting up to 10 minutes to settle. The integration of Afterpay grew its seller base by 10% to over 20,000 sellers. They plan on making BNPL available for in-person payment soon.
SQ Price Trajectories
Using the rifle charts on a weekly and daily time frame provides a precision view of the landscape for SQ stock. The weekly rifle chart breakdown is starting to stall out after coiling off the $59.04 Fibonacci (fib) level. The weekly downtrend has a flattening 5-period moving average (MA) at $65.28 followed by a falling 15-period MA at $85.49. The weekly stochastic is stalled at the 10-band to either cross up or mini inverse pup down. The weekly 200-period MA resides at $130.52. The weekly lower Bollinger Bands (BBs) sit at $30.59. The weekly market structure low (MSL) buy triggers on a breakout through the $71.01 level. The daily rifle chart has been compressing as evidenced by the inward upper and lower BBs at $73.42 and $55.37, respectively. Compression precedes and expansion. The direction is unknown yet. The daily 5-period MA is flat at $64.16 and 15-period MA at $65.56. The daily 50-period MA sits at $64.39. The daily stochastic has crossed down to test the 40-band. The stock is very volatile on its earnings report and therefore a larger price range is expected. Prudent investors can look for opportunistic pullback entry levels at the $59.04 fib, $54.51, $50.54 fib, $46.38 fib, $39.81 fib, $35.42, and the $32.33 fib level. Upside trajectories range from the $82.72 level up towards the $105.93 fib level.
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