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Fintech company Block (SQ) will trade under a new ticker on the New York Stock Exchange starting Jan. 21: XYZ. The company, led by Twitter co-founder Jack Dorsey, has had a history of rebranding itself. In December 2021, the company rebranded and changed its name from Square to Block.
However, a mere change in the company’s ticker may not be as much of a material event for investors pondering whether to invest in the stock or not. For that, a closer look at the company’s financials and strategic moves is warranted.
About Block Stock
Founded in 2009, Block is a technology company specializing in financial services. It offers a diverse range of financial services and products, including Square, Cash App, AfterPay, and Bitkey. These brands incorporate solutions such as a Bitcoin wallet and peer-to-peer payments. The company’s market capitalization currently stands at $50.5 billion.
Block stock has been an outperformer over the past year, rising 33% over the past 52 weeks. The share price was also able to shrug off the decline caused by short-seller Hindenburg Research in March 2023, increasing roughly 40% since then.
So, apart from a new ticker, what else should market participants know about Block? Let's find out.
Stable Financials
Block has had a consistent history of delivering revenue and earnings growth in recent years. The last three years saw the company reporting revenue and earnings compound annual growth rates (CAGRs) of 12.54% and 24.25%, respectively.
Although the results for the most recent quarter disappointed the Street with both revenue and earnings missing estimates, the top and bottom lines were up when compared to the prior-year period. In the third quarter of 2024, Block reported net revenues of $5.98 billion, up 6.4% from the previous year. Bitcoin (BTCUSD) revenue ($2.43 billion) and subscription and services-based revenue ($1.79 billion) were the key contributors to the overall growth with revenues from the company’s Bitcoin operations aided by the searing cryptocurrency rally.
On top of that, fixed costs continue to decline relative to sales, which is a strong indicator that Block could realize more economies of scale.
Meanwhile, earnings soared to $0.88 per share from $0.50 per share in the year-ago period. Notably, this marked the 7th consecutive quarter of reporting year-over-year earnings growth from the company with earnings estimates beat on five occasions.
Additionally, gross payments volume came in at $62.5 billion which represented growth of 4% from the prior year.
Further, adjusted free cash flow also witnessed a year rise to $1.5 billion from $945 million in the year-ago period. Overall, Block closed the quarter with cash and cash equivalents of $9.9 billion.
On the back of such strong financials, analysts are expecting the company to report a forward revenue growth rate of 15.97%, which is much higher than the sector median of 5.60%.
Growth Drivers Intact
During its latest conference call, Block’s management expressed optimism about payment volume growth at Square for the year and highlighted potential regulatory clarity for cryptocurrencies, which could accelerate growth in its crypto trading operations.
Further, Block is also positioning its Cash App Card as a stronger alternative to traditional credit cards with the integration of AfterPay. With 24 million Cash App Cards issued, the ecosystem — including Square Loans, AfterPay, and Cash App Borrow — targets underserved U.S. adults lacking traditional credit access. Since 2013, Block has underwritten $22 billion in global loans with an aggregate loss rate below 3%.
Cash App continues to gain momentum, driven by the growing adoption of the Cash App Card, which connects users to the ecosystem. In the September quarter, Cash App Card users grew 11% year-over-year to 24 million. This adoption is a key catalyst for Block’s growth.
Meanwhile, AfterPay has also been a driver of advertising revenue for Block, generating 460 million leads to merchants over the past year and attracting over 138 million customer visits. Block’s underwriting process has maintained loss rates at approximately 1% for buy now, pay later, under 3% for Cash App Borrow, and 4% or less for Square Loans.
Lastly, management is focused on strengthening Square’s positioning through initiatives like centralized sales leadership, an improved onboarding experience for sellers, and the launch of App Card Spending Insights in June 2024. This feature provides users with a detailed view of their spending patterns, supporting better financial decisions.
Analyst Opinions on SQ Stock
Analysts remain bullish about Block stock, giving it an overall rating of “Strong Buy” with a mean target price of $98.97. This denotes upside potential of about 16.7% from current levels. Out of 37 analysts covering the stock, 27 have a “Strong Buy” rating, three have a “Moderate Buy” rating, four have a “Hold” rating, one has a “Moderate Sell” rating and two have a “Strong Sell” rating.
