Once a firm surpasses Wall Street's profit estimates, the financial community takes notice. Stocks are traded based on the anticipation of future results, not past performance.
The reason behind the newfound optimism among investors and analysts about Block (NYSE: SQ), a fintech stock, is that the company provided profitability guidance for both the current quarter and the entire year that exceeded market expectations.
An analyst at a prominent bank was among several who swiftly upgraded Block's stock to a buy recommendation and increased their price targets.
The day following Block's 2023 annual and quarterly earnings reports, Wells Fargo analyst Andrew Bauch upgraded the stock from equal weight (hold) to overweight (buy). Bauch raised their price target for the company's shares from $65 to $95 following the change in recommendation.
According to Bauch, the most recent results were impressive, with non-GAAP (adjusted) net income in the fourth quarter increasing by more than 100% year-over-year to $285 million. The company's net income increased by 25% to $5.77 billion.
The analyst was also rather pleased with Block's expectations for the first quarter, which ranged from $570 million to $590 million in adjusted profits before interest, taxes, depreciation, and amortization
The average expert forecast was $570 million, so that range was higher than expected.
Block's "reasonable" value and its strategy for keeping its growth train rolling were highlighted in Bauch's study. Now ubiquitous, the company's point-of-sale payment terminals are being augmented by an ecosystem of apps and services.
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