Earnings Update: Block, Inc. (NYSE:SQ) Just Reported Its Second-Quarter Results And Analysts Are Updating Their Forecasts

There's been a notable change in appetite for Block, Inc. (NYSE:SQ) shares in the week since its quarterly report, with the stock down 19% to US$63.52. Revenues were a bright spot, with US$5.5b in revenue arriving 8.5% ahead of expectations, although statutory earnings didn't fare nearly so well, recording a loss of US$0.20, some 5.0% below consensus predictions. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Block

Taking into account the latest results, the consensus forecast from Block's 37 analysts is for revenues of US$21.2b in 2023. This reflects a modest 7.8% improvement in revenue compared to the last 12 months. The loss per share is expected to ameliorate slightly, reducing to US$0.43. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$20.7b and losses of US$0.42 per share in 2023. So it's pretty clear consensus is mixed on Block after the new consensus numbers; while the analysts lifted revenue numbers, they also administered a modest increase to per-share loss expectations.

The consensus price target stayed unchanged at US$84.52, seeming to suggest that higher forecast losses are not expected to have a long term impact on the valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Block, with the most bullish analyst valuing it at US$110 and the most bearish at US$34.98 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Block's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 16% growth on an annualised basis. This is compared to a historical growth rate of 37% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 5.8% annually. Even after the forecast slowdown in growth, it seems obvious that Block is also expected to grow faster than the wider industry.

The Bottom Line

The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Block. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Block. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Block going out to 2025, and you can see them free on our platform here..

Plus, you should also learn about the 2 warning signs we've spotted with Block .

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.