Shares of financial services company Block declined about 7 percent in Friday’s premarket trading after the company reported its earnings report. The company reported a loss in quarterly results following a decline in the interest in cryptocurrencies.
The Jack Dorsey-owned company had almost $3.5 billion erased from its market value earlier today, and its stock has declined over 44 percent this year. The company, like many others, also mentioned that it had slowed hiring. Block said it would be cutting its 2022 investment target by $250 million in the face of the raging macroeconomic challenges. In a note, analysts at JP Morgan noted that “The act of cutting spend suggests SQ is bracing for potentially weaker growth.”
For the second quarter, the company reported a loss of 36 cents per share. This was down from a profit of 40 cents per share from the same period last year. However, the brokerage maintained its “overweight” rating and $107 price target for the stock, citing underlying earnings potential from its buy now, pay-later business, which earned $150 million in gross profit in the quarter.
Block’s business has been affected by investors’ waning interest in Bitcoin and other cryptocurrencies this year. Other factors such as inflation, and the Federal Reserve’s increased grip has also led to the sell-off of assets. Companies like Block had benefitted hugely from the frenzy that cryptocurrencies were characterized by last year.
Block’s Bitcoin gross profit – earnings from the buying and selling of the world’s biggest cryptocurrency- declined 24 percent to $41 million in the second quarter. The figure stood at $55 million a year ago. “Shares had rallied by almost 35% during the eight trading sessions prior to the print. The company likely would have needed to produce a nearly flawless report in order for that surge to continue,” analysts at BTIG noted.
Ibhadojemu Lucky Emmanuel is a graduate of Education and Economics from the University of Benin. He has a passion for tech and business and has been writing professionally for over a period of five years. He's written across various topics and segments and knew tech-business was it when he first stumbled on it. He has a great passion for music and arts, and wants to visit as many countries as he can someday.
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