We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
SQ Stock Price Decreases 15.2% YTD: Should Investors Hold or Fold?
Read MoreHide Full Article
Block, Inc. (SQ - Free Report) shares have lost 15.2% in the year-to-date (YTD) period against the industry’s 21.3% growth. It has also lagged the broader Zacks Business Services sector’s 10.2% return and the S&P 500’s 18.2% rally in the said time frame.
The company has been grappling with weakening transaction activities on Cash App, and softness in consumer spending trends in food and drink, and retail discretionary verticals.
Broader market volatility, high inflation, increased interest rates, unfavorable foreign exchange fluctuations and normalization trends in the post-pandemic era have been acting as headwinds.
Specific challenges associated with the security of payments and money transfer in the digital payments industry, and regulatory uncertainties in the cryptocurrency space are other concerns for SQ.
Increasing pricing pressure due to rising competition from the likes of PayPal (PYPL - Free Report) in the peer-to-peer to payments space does not bode well. SQ also faces stiff competition from Affirm (AFRM - Free Report) in the booming buy now, pay later (BNPL) market.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Block’s comprehensive commerce ecosystem, which enables sellers to combine software, hardware and payment services to accept payments from customers, is driving its prospects and momentum across sellers of various sizes.
Integrations across the company’s product lines, which deliver enhanced user experience, are driving its business growth.
The combination of both risks and rewards is prompting investors to question whether to maintain their positions or consider selling their SQ shares.
Portfolio Strength Drives SQ’s Growth
Block’s strong positioning in the peer-to-peer payment and digital commercial transactions on the back of its robust Square ecosystem is a major positive.
The company provides payment and point-of-sale (POS) services, which include both hardware and software, to accept payments, streamline operations and analyze business information.
Growing momentum across the Cash App ecosystem on the back of the solid adoption of Cash App Card and Cash App Borrow is another positive.
SQ is constantly gaining momentum in the cryptocurrency market on the back of CashApp, which allows users to buy, sell, send and receive bitcoins. The expanding global footprint of its self-custody bitcoin wallet, Bitkey, is a plus.
It offers omnichannel solutions, which help sellers deliver enhanced customer experiences. These solutions provide customer insights by managing orders from POS and eliminating manual aggregation of online and in-person orders.
Block’s efforts to deliver differentiated yet better experiences to sellers on the back of artificial Intelligence (AI) integrations are noteworthy. 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 growing momentum in the BNPL market on the back of its well-performing Afterpay division is a tailwind. Afterpay’s strong collaboration with various brands and merchants, such as Curology, Helzberg Diamonds, Journeys, Rawlings Sporting Goods, Diane von Furstenberg, Diggs, For Eyes and Kendra Scott, to deliver an enhanced shopping experience, is noteworthy.
Rising Estimates & Attractive Valuation
Block’s 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.
For 2024, the company raised its guidance for gross profit from $8.78 billion to $8.89 billion, indicating growth of 18% from the 2023 actual. The guidance for 2024 adjusted EBITDA was increased from $2.76 billion to $2.90 billion. Management also revised the guidance for operating income from $1.30 billion to $1.44 billion.
The Zacks Consensus Estimate for 2024 revenues is pegged at $24.52 billion, implying year-over-year growth of 11.9%.
The consensus mark for earnings is pegged at $3.58 per share, suggesting a year-over-year rise of 98.9%. The estimate has been revised 9.1% upward in the past 30 days.
Image Source: Zacks Investment Research
Block also offers an attractive valuation at current levels.
SQ is trading at a discount, with a forward 12-month P/S of 1.55X compared with the industry’s 6.8X and lower than the median of 1.57X.
Image Source: Zacks Investment Research
Cash App Challenges are Concerning for Block
SQ has been gaining solid seller momentum 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 Block’s robust Square ecosystem, which is increasing its Gross Payment Volume (GPV). In second-quarter 2024, the company processed $61.94 billion of GPV, up 5% year over year. Square’s GPV was $58.37 billion (94.2% of the total GPV) in the second quarter, up 8% year over year.
Declining transaction activities on the Cash App ecosystem have been concerning. Cash App accounted for $3.57 billion of the overall GPV (5.8%), which decreased 27% year over year.
Cash App contribution to transaction revenues was also weak. In the same quarter, Cash App contributed $99 million to transaction revenues, down 26% year over year.
Final Take on SQ
Block's 15.2% YTD dip presents a complex investment opportunity. While the company's strong market position, portfolio strength, rising estimates and attractive valuation metrics suggest upside, ongoing market challenges and declining Cash App transaction activities cannot be ignored.
Investors should carefully weigh these factors against their risk tolerance and long-term investment goals before making a decision. While it may be premature to abandon the stock for those who have already invested in it, new investors should wait for a better entry point.
Image: Shutterstock
SQ Stock Price Decreases 15.2% YTD: Should Investors Hold or Fold?
Block, Inc. (SQ - Free Report) shares have lost 15.2% in the year-to-date (YTD) period against the industry’s 21.3% growth. It has also lagged the broader Zacks Business Services sector’s 10.2% return and the S&P 500’s 18.2% rally in the said time frame.
The company has been grappling with weakening transaction activities on Cash App, and softness in consumer spending trends in food and drink, and retail discretionary verticals.
Broader market volatility, high inflation, increased interest rates, unfavorable foreign exchange fluctuations and normalization trends in the post-pandemic era have been acting as headwinds.
Specific challenges associated with the security of payments and money transfer in the digital payments industry, and regulatory uncertainties in the cryptocurrency space are other concerns for SQ.
Increasing pricing pressure due to rising competition from the likes of PayPal (PYPL - Free Report) in the peer-to-peer to payments space does not bode well. SQ also faces stiff competition from Affirm (AFRM - Free Report) in the booming buy now, pay later (BNPL) market.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Block’s comprehensive commerce ecosystem, which enables sellers to combine software, hardware and payment services to accept payments from customers, is driving its prospects and momentum across sellers of various sizes.
Integrations across the company’s product lines, which deliver enhanced user experience, are driving its business growth.
The combination of both risks and rewards is prompting investors to question whether to maintain their positions or consider selling their SQ shares.
Portfolio Strength Drives SQ’s Growth
Block’s strong positioning in the peer-to-peer payment and digital commercial transactions on the back of its robust Square ecosystem is a major positive.
The company provides payment and point-of-sale (POS) services, which include both hardware and software, to accept payments, streamline operations and analyze business information.
Growing momentum across the Cash App ecosystem on the back of the solid adoption of Cash App Card and Cash App Borrow is another positive.
SQ is constantly gaining momentum in the cryptocurrency market on the back of CashApp, which allows users to buy, sell, send and receive bitcoins. The expanding global footprint of its self-custody bitcoin wallet, Bitkey, is a plus.
It offers omnichannel solutions, which help sellers deliver enhanced customer experiences. These solutions provide customer insights by managing orders from POS and eliminating manual aggregation of online and in-person orders.
Block’s efforts to deliver differentiated yet better experiences to sellers on the back of artificial Intelligence (AI) integrations are noteworthy. 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 growing momentum in the BNPL market on the back of its well-performing Afterpay division is a tailwind. Afterpay’s strong collaboration with various brands and merchants, such as Curology, Helzberg Diamonds, Journeys, Rawlings Sporting Goods, Diane von Furstenberg, Diggs, For Eyes and Kendra Scott, to deliver an enhanced shopping experience, is noteworthy.
Rising Estimates & Attractive Valuation
Block’s 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.
For 2024, the company raised its guidance for gross profit from $8.78 billion to $8.89 billion, indicating growth of 18% from the 2023 actual. The guidance for 2024 adjusted EBITDA was increased from $2.76 billion to $2.90 billion. Management also revised the guidance for operating income from $1.30 billion to $1.44 billion.
The Zacks Consensus Estimate for 2024 revenues is pegged at $24.52 billion, implying year-over-year growth of 11.9%.
The consensus mark for earnings is pegged at $3.58 per share, suggesting a year-over-year rise of 98.9%. The estimate has been revised 9.1% upward in the past 30 days.
Image Source: Zacks Investment Research
Block also offers an attractive valuation at current levels.
SQ is trading at a discount, with a forward 12-month P/S of 1.55X compared with the industry’s 6.8X and lower than the median of 1.57X.
Image Source: Zacks Investment Research
Cash App Challenges are Concerning for Block
SQ has been gaining solid seller momentum 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 Block’s robust Square ecosystem, which is increasing its Gross Payment Volume (GPV). In second-quarter 2024, the company processed $61.94 billion of GPV, up 5% year over year. Square’s GPV was $58.37 billion (94.2% of the total GPV) in the second quarter, up 8% year over year.
Declining transaction activities on the Cash App ecosystem have been concerning. Cash App accounted for $3.57 billion of the overall GPV (5.8%), which decreased 27% year over year.
Cash App contribution to transaction revenues was also weak. In the same quarter, Cash App contributed $99 million to transaction revenues, down 26% year over year.
Final Take on SQ
Block's 15.2% YTD dip presents a complex investment opportunity. While the company's strong market position, portfolio strength, rising estimates and attractive valuation metrics suggest upside, ongoing market challenges and declining Cash App transaction activities cannot be ignored.
Investors should carefully weigh these factors against their risk tolerance and long-term investment goals before making a decision. While it may be premature to abandon the stock for those who have already invested in it, new investors should wait for a better entry point.
Block currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.