We came across a bullish thesis on Block, Inc. (SQ) on Long-Term Pick’s Substack by Dan. In this article, we will summarize the bulls’ thesis on SQ. Block, Inc. (SQ)’s share was trading at $90.79 as of Nov 18th. SQ’s trailing and forward P/E were 54.37 and 18.69 respectively according to Yahoo Finance.
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Block (SQ) continues to establish itself as a leader in fintech, driven by strong financial performance and growth potential. In its latest Q3 2024 earnings report, the company posted a 19% year-over-year increase in gross profit, reaching $2.25 billion, with robust growth in both the Square and Cash App segments. Notably, Block achieved its highest quarterly profitability ever, supported by significant improvements in adjusted operating income and EBITDA, prompting an upward revision of its full-year guidance for these metrics. This reflects confidence in its operational strategy and execution.
The Cash App segment remains a standout performer, with enhanced attach rates for financial products like paycheck deposits driving greater engagement and monetization. Investments in growth initiatives, particularly in go-to-market strategies, are expected to further propel expansion in 2025. However, challenges persist. Moderated growth in Cash App’s monthly active users, anticipated to close the year at approximately 57 million, reflects difficulties in user acquisition. This slowdown is partly strategic, as Block prioritizes engagement and platform health over aggressive new user growth. Additionally, regulatory uncertainties in the fintech and banking sectors could impact future operations.
Short-term hurdles include delays in realizing transaction cost benefits and Cash App Borrow’s expansion, both of which are now expected to drive growth starting in 2025. Meanwhile, the rollout of new products, such as Afterpay integration with the Cash App Card, remains in its early stages, delaying the full realization of their benefits.
Despite these challenges, Block’s valuation remains compelling. With a base case target price of $99.97 and a current price of $83.42, the stock offers significant upside potential for investors. Block’s strong profitability trends, market leadership, and strategic investments position it as a dominant fintech player. The company’s deliberate focus on sustainable engagement and innovation underscores its long-term growth potential, making the current price an attractive entry point for investors seeking resilient returns with limited downside risk.
Block, Inc. (SQ) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 59 hedge fund portfolios held SQ at the end of the second quarter which was 65 in the previous quarter. While we acknowledge the risk and potential of SQ as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SQ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.