• Block Inc (NYSE: SQ) reported a 7.0% decline in its fourth quarter bitcoin revenue.
• Baird’s senior analyst David Koning said that at the current stock price, BTC’s contribution of 4.0% to gross profit doesn’t really matter.
• Block revealed a $9 million impairment charge related to its BTC investment in Q4 versus $2 million only in the prior quarter.
Block Reports Decline In Bitcoin Revenue
Block Inc (NYSE: SQ) reported a 7.0% decline in its fourth quarter bitcoin revenue. The San Francisco-based multinational noted a hit to its bitcoin revenue in the recent quarter due to the slump in bitcoin price and had a fair value of $133 million as of December 31st.
Baird Analyst’s Outlook On Block Stock
Reacting to it on CNBC’s „Closing Bell: Overtime“, Baird’s senior analyst David Koning said: Bitcoin mattered when Block was at $250 a share. At $70, it doesn’t matter. It’s 4.0% of gross profit. I haven’t even looked closely at it, that’s how much it matters. BTC generated $35 million of gross profit for Block Inc in Q4 – a 25% year-on-year decline related to the slump in bitcoin price .
Koning is keeping bullish on Block stock despite the decline and sees potential upside with his price target of $85 a share which suggests about 15%. He added that Cash App has been performing well and accelerating beyond what analysts have modelled for Q1 2021, indicating good news for stockholders tomorrow when trading resumes during regular hours.
Impairment Charge Related To Its BTC Investment
In its letter to shareholders, Block revealed a $9 million impairment charge related to its BTC investment in Q4 versus only $2 million only in the prior quarter . For the full year, Block Inc is now calling for $1 billion of adjusted EBITDA with gross profit sitting at 25%, up from 22% seen during this recent quarter .
Conclusion
Despite reporting decreased revenues from Bitcoin investments, shares of Block Inc are still trading higher mainly because former Twitter CEO Jack Dorsey’s company reported overall quarterly revenue slightly above expectations and better performances from Cash App than anticipated by analysts for Q1 2021 .