Block’s (SQ.N) shares jumped nearly 18% before the bell on Friday and were set to open at their highest since mid-September, rallying on the payments firm’s better-than-expected earnings forecast for 2024 and a $1 billion stock buyback plan.
If premarket gains hold, the company could add nearly $5 billion to its market value, based on the stock’s last trading price of $51.85, according to Reuters calculations.
Block said on Thursday it expects adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $2.4 billion, much higher than analysts’ average estimate of $2.08 billion, according to LSEG data.
It took some analysts by surprise as it alluded to an increased focus on keeping expenses under control. The company would create an “absolute cap on the number of people we have…held firm at 12,000 people” until gains in the business outpaced headcount growth, CEO Jack Dorsey said.
“This felt like a turning point in messaging and strategy, with management drawing hard lines around growth, headcount and profitability, checking many boxes on our wish list to unlock value,” JPMorgan’s Tien-tsin Huang said.
The emphasis on profitability echoed the commentary from Block’s larger peer PayPal Holdings (PYPL.O), which said earlier this week that it would turn “leaner” to drive growth.
PayPal’s shares climbed 1.2% in premarket trading.
Block’s initial plan to repurchase $1 billion worth of shares also raised investor spirits, as Dorsey said the buybacks would offset some dilution from share-based compensation to employees.
SOURCE: reuters.com