Investors took a bit of a ride with Block (SQ 2.54%) on Friday as the stock bounced up and down throughout the trading day. It was down 7.6% to $82.88 shortly after the opening bell, then surged to $93.19 at around 10:30 a.m. ET, up 3.9%. But it sank again as the day wore on, finishing down 2.3% at $87.66.
The catalyst was the fintech's second-quarter report, which was released Thursday after market close. It was something of a mixed bag -- hence the volatility of the stock Friday.
The mixed bag for Block stemmed from the fact that it beat earnings and revenue estimates, but underperformed on two key metrics. It booked a net loss of $0.36 per share, in sharp contrast to its net income of $0.40 per share in the second quarter of 2021. On an adjusted basis, which analysts track, Block had earnings of $0.18 per share, down from $0.49 per share in the prior-year period, but ahead of analysts' consensus estimate of $0.16 per share. Also, revenue came in at $4.4 billion, down 6% year over year, but ahead of the $4.3 billion consensus estimate.
Bitcoin proved to be a big drag on Block's earnings as revenue from Bitcoin transactions on its Cash App fell by 34% year over year to $1.8 billion. Cash App gross profit was still up 29% to $705 million.
Overall, gross profit was up 29% to $1.47 billion, but that was slightly below estimates of $1.49 billion. Its newly acquired "buy now, pay later" business, Afterpay, contributed $150 million in gross profit. Gross payment volume, another key metric, was up 23% to $52.5 billion, but that was slightly below estimates for $53 billion.
On the second-quarter earnings call, CFO Amrita Ahuja said she expects gross profits on both the Cash App and Square sides of the business to grow in Q3 and Q4, assuming the economy remains stable.
However, the company will scale back on its planned investments by $250 million. In total, the operating expense plan will be reduced by $450 million this year. But still, Block's operating expenses are expected to grow by about 30% year over year.
Overall, analysts appeared more bullish about the earnings report than investors, as RBC raised its price target to $95 from $91, while Bank of America's analyst said the pullback after the earnings report appeared "overdone," reported The Fly.