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Block (SQ) Gains 9% in 6 Months: Should You Buy the Stock?
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Block (SQ - Free Report) has seen its stock price increase 9% in the past six months, slightly below the broader Zacks Business-Services sector’s rise of 9.1% and underperforming the industry’s growth of 23.5%. This modest gain came amid a challenging macroeconomic environment, raising questions about the company's future trajectory and what investors can expect moving forward.
Market uncertainties, high inflation, unfavorable foreign exchange fluctuations and sluggish trends in consumer spending are concerning for the company. The normalization trend in the post-pandemic era is a negative.
Nevertheless, Block’s strong positioning in the digital payments industry on the back of its robust payment and point-of-sale (POS) solutions, which include both hardware and software to accept payments, streamline operations, and analyze business information, is a major positive.
SQ’s comprehensive commerce ecosystem, which enables sellers to combine software, hardware and payment services to accept payments from customers, helps it sustain solid momentum across sellers. Strength Square ecosystem is a plus.
Growing momentum in cryptocurrency and ‘buy now, pay later’ (BNPL) has turned out to be the company’s key catalyst.
Six Months Price Performance
Image Source: Zacks Investment Research
Block Rides on Portfolio Strength
SQ has been doing well with millions of sellers across various industries, such as food, retail and services, and geographies, including the United States, Japan, Australia and Canada. The primary factor behind this remains its robust product portfolio, which, in turn, is increasing its Gross Payment Volume (GPV). In 2023, the company processed $227.7 billion of GPV, up 12% from 2022.
Growing momentum across the Square ecosystem and the solid adoption of CashApp are the key growth drivers of the company. Both of these help Block in facilitating seamless peer-to-peer payment and digital commercial transactions.
Block leverages artificial Intelligence (AI) to deliver an enhanced seller experience. Square Online's Themes and Square for Retail's AI-generated product descriptions help sellers enhance their customer engagement and automate sales.
Square also offers generative AI features to sellers, enabling them to automate operations, speed up workflows and save time.
The company’s omnichannel offerings, which help sellers create differentiated customer experiences on the back of customer insights by managing orders from POS and eliminating manual aggregation of online and in-person orders, are adding strength to its seller base.
Block is constantly gaining momentum in the cryptocurrency market on the back of CashApp, which allows users to buy, sell, send and receive bitcoins.
Its decentralized TBD platform, which enables developers to build decentralized finance applications that run on programmable blockchains, is noteworthy.
Block’s self-custody bitcoin wallet, Bitkey, is also boosting its presence in the cryptocurrency space. The company offers Bitkey in more than 95 countries across six continents, allowing users to easily and safely own and manage their bitcoins.
Strong Partner Base Aids BNPL Prospects
Per a Fortune Business Insights report, the global BNPL market is expected to hit $37.19 billion in 2024 and reach $167.58 billion by 2032, witnessing a CAGR of 20.7% between 2024 and 2032.
Block is well-poised to capitalize on these growth prospects on the heels of its Afterpay division and strong partner base.
Recently, Afterpay partnered with several brands, including Curology, Helzberg Diamonds, Journeys, Rawlings Sporting Goods and Zenni Optical, in order to deliver an enhanced shopping experience to U.S. customers.
Afterpay collaborated with various merchants, including Diane von Furstenberg, Diggs, For Eyes and Kendra Scott, to offer installment payments for purchases from these merchants.
Afterpay’s partnership with the e-commerce technology company Rokt in a bid to boost the online shopping experience for customers is noteworthy. This partnership enables Afterpay and its retail partners to provide relevant advertising experiences to targeted customers during the checkout process using Rokt's e-commerce solution.
On the back of these partnerships, Block remains firmly positioned to compete with peers like PayPal (PYPL - Free Report) and Mastercard (MA - Free Report) , which are also making concerted efforts to strengthen their foothold in the BNPL market.
Conclusion
Block’s near and long-term prospects are expected to benefit from compelling products and solutions, a comprehensive payment ecosystem, and a strong position in the digital payment industry.
SQ’s strong competitive position in the booming BNPL space, along with solid momentum in cryptocurrency, is expected to drive its overall financial performance.
For 2024, Block raised its guidance for gross profit from $8.65 billion to $8.78 billion, indicating growth of 17% from that reported in 2023. The guidance for 2024 adjusted EBITDA increased from $2.63 billion to $2.76 billion. Management also revised the guidance for operating income from $1.15 billion to $1.30 billion.
The Zacks Consensus Estimate for 2024 revenue is pegged at $25.02 billion, implying year-over-year growth of 14.2%.
The consensus mark for earnings is pegged at $3.11 per share, suggesting a year-over-year rise of 72.8%. The estimate has been revised 0.6% upward in the past 60 days.
Image Source: Zacks Investment Research
Block is currently trading at a discount, with a forward 12-month P/S of 1.57X compared with the industry’s 6.36X. This indicates a solid opportunity and a strong entry point for investors.
Image: Shutterstock
Block (SQ) Gains 9% in 6 Months: Should You Buy the Stock?
Block (SQ - Free Report) has seen its stock price increase 9% in the past six months, slightly below the broader Zacks Business-Services sector’s rise of 9.1% and underperforming the industry’s growth of 23.5%. This modest gain came amid a challenging macroeconomic environment, raising questions about the company's future trajectory and what investors can expect moving forward.
Market uncertainties, high inflation, unfavorable foreign exchange fluctuations and sluggish trends in consumer spending are concerning for the company. The normalization trend in the post-pandemic era is a negative.
Nevertheless, Block’s strong positioning in the digital payments industry on the back of its robust payment and point-of-sale (POS) solutions, which include both hardware and software to accept payments, streamline operations, and analyze business information, is a major positive.
SQ’s comprehensive commerce ecosystem, which enables sellers to combine software, hardware and payment services to accept payments from customers, helps it sustain solid momentum across sellers. Strength Square ecosystem is a plus.
Growing momentum in cryptocurrency and ‘buy now, pay later’ (BNPL) has turned out to be the company’s key catalyst.
Six Months Price Performance
Image Source: Zacks Investment Research
Block Rides on Portfolio Strength
SQ has been doing well with millions of sellers across various industries, such as food, retail and services, and geographies, including the United States, Japan, Australia and Canada. The primary factor behind this remains its robust product portfolio, which, in turn, is increasing its Gross Payment Volume (GPV). In 2023, the company processed $227.7 billion of GPV, up 12% from 2022.
Growing momentum across the Square ecosystem and the solid adoption of CashApp are the key growth drivers of the company. Both of these help Block in facilitating seamless peer-to-peer payment and digital commercial transactions.
Block leverages artificial Intelligence (AI) to deliver an enhanced seller experience. Square Online's Themes and Square for Retail's AI-generated product descriptions help sellers enhance their customer engagement and automate sales.
Square also offers generative AI features to sellers, enabling them to automate operations, speed up workflows and save time.
The company’s omnichannel offerings, which help sellers create differentiated customer experiences on the back of customer insights by managing orders from POS and eliminating manual aggregation of online and in-person orders, are adding strength to its seller base.
Block is constantly gaining momentum in the cryptocurrency market on the back of CashApp, which allows users to buy, sell, send and receive bitcoins.
Its decentralized TBD platform, which enables developers to build decentralized finance applications that run on programmable blockchains, is noteworthy.
Block’s self-custody bitcoin wallet, Bitkey, is also boosting its presence in the cryptocurrency space. The company offers Bitkey in more than 95 countries across six continents, allowing users to easily and safely own and manage their bitcoins.
Strong Partner Base Aids BNPL Prospects
Per a Fortune Business Insights report, the global BNPL market is expected to hit $37.19 billion in 2024 and reach $167.58 billion by 2032, witnessing a CAGR of 20.7% between 2024 and 2032.
Block is well-poised to capitalize on these growth prospects on the heels of its Afterpay division and strong partner base.
Recently, Afterpay partnered with several brands, including Curology, Helzberg Diamonds, Journeys, Rawlings Sporting Goods and Zenni Optical, in order to deliver an enhanced shopping experience to U.S. customers.
Afterpay collaborated with various merchants, including Diane von Furstenberg, Diggs, For Eyes and Kendra Scott, to offer installment payments for purchases from these merchants.
Afterpay’s partnership with the e-commerce technology company Rokt in a bid to boost the online shopping experience for customers is noteworthy. This partnership enables Afterpay and its retail partners to provide relevant advertising experiences to targeted customers during the checkout process using Rokt's e-commerce solution.
On the back of these partnerships, Block remains firmly positioned to compete with peers like PayPal (PYPL - Free Report) and Mastercard (MA - Free Report) , which are also making concerted efforts to strengthen their foothold in the BNPL market.
Conclusion
Block’s near and long-term prospects are expected to benefit from compelling products and solutions, a comprehensive payment ecosystem, and a strong position in the digital payment industry.
SQ’s strong competitive position in the booming BNPL space, along with solid momentum in cryptocurrency, is expected to drive its overall financial performance.
For 2024, Block raised its guidance for gross profit from $8.65 billion to $8.78 billion, indicating growth of 17% from that reported in 2023. The guidance for 2024 adjusted EBITDA increased from $2.63 billion to $2.76 billion. Management also revised the guidance for operating income from $1.15 billion to $1.30 billion.
The Zacks Consensus Estimate for 2024 revenue is pegged at $25.02 billion, implying year-over-year growth of 14.2%.
The consensus mark for earnings is pegged at $3.11 per share, suggesting a year-over-year rise of 72.8%. The estimate has been revised 0.6% upward in the past 60 days.
Image Source: Zacks Investment Research
Block is currently trading at a discount, with a forward 12-month P/S of 1.57X compared with the industry’s 6.36X. This indicates a solid opportunity and a strong entry point for investors.
SQ currently has a Zacks Rank #2 (Buy) and a Growth Style Score of A. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research