Should I Buy Block Inc. (SQ)? Finance YouTuber Analysis

The YouTuber closed a portion of their Block position, realizing a 60% profit, to reduce risk and take profits. While they remain bullish on Block long-term, they acknowledge the possibility of a new low and are managing their exposure.

“Wir haben aber nach wie vor die Alternative auf dem Chart, dass wir noch mal ein deutliches neues Tief reißen. Deswegen wir nehmen Risiko raus, wir realisieren Gewinne.”

The company has undergone significant internal restructuring and is now rapidly developing new AI-powered products like Managerbot and Moneybot, indicating a renewed focus on innovation and product velocity. This, combined with their strong distribution through Square and Cash App, positions them well to leverage AI for both merchant and consumer financial services, potentially unlocking new use cases and deepening product integration.

“So, very excited about what they're doing. Um, we've always been excited thinking about, you know, this company specifically when you have on the Square side of the business this merchant terminal. Um, but then when you loop in Cap Cash App, which there were some crazy stats there.”

The analyst considers Block a leader in the digital wallet space, noting its comprehensive offerings including tax filing, checking, savings, crypto, and a brokerage account within Cash App. However, they suggest Robinhood's starting point in brokerage gives it a long-term advantage, as Block primarily targets lower-income households and the unbanked, a different market segment.

“Block has has done a tremendous job though. You know they have their tax um uh filing system, they have checking, they have savings, they offer crypto, they have a brokerage account. So they do have all of that in Cash App.”

Cathie Wood holds Block (Cash App) in her firm's portfolios, citing its efforts around Bitcoin and its potential to become a dominant digital wallet or 'everything app.' She highlights its origin in lower-income areas and its potential for continued proliferation.

“we hold uh Robin Hood uh cash I mean a block for cash app and everything Jack and team are doing around Bitcoin”

This creator believes Block is a strong contender in the digital wallet space, leveraging its Square and Cash App ecosystems to facilitate closed-loop payments. They project significant growth in net payment processing revenues and merchant banking, driven by the displacement of traditional intermediaries and the monetization of employee digital wallets.

“in total we think block toast and Shopify can scale their monetization of their Merchants employee base from approximately $100 million today to a $25 billion opportunity in 2030 at an annual growth rate of 123%”

The analyst believes Block is a potential winner in the US digital wallet race, citing Jack Dorsey's renewed commitment to the Square division and explicit plans for cross-team collaboration between Cash App and Square. This collaboration is expected to unlock product and cost synergies, aligning with their thesis on vertical software plays capturing value in payment ecosystems.

“Jack dorsey's comments that reaffirmed I think significant investor confidence in Block as a potential winner in the US digital wallet race.”

The YouTuber sold Block at a significant loss, stating he was not as convinced by its business model or management compared to other investments. He rotated the capital into Hims & Hers, which he felt was a 'safer or faster horse' to recover losses.

“Bei Block sieht es bei mir doch etwas anders aus, weil ich halt einfach dort erstens mich nicht so krass intensiv wie z.B. mit dem Curse mit dem Geschäftsmodell befasst habe und zum anderen auch vom Management einfach nicht so krass überzeugt bin.”

The analyst recommends Block (SQ) due to its strong growth in transaction business (36% CAGR since 2012) and high-margin subscription services, which are essentially a SaaS business. He also notes the company's current valuation at 17 times next 12-month expected earnings is attractive given its sticky customer base, growth in Cash App, and potential to disrupt the payments industry by offering alternative rails.

“from a valuation perspective block is actually pretty cheap as well if you look at a next 12-month basis Shares are trading for just 17 times expected earnings that is a great value given how sticky the business is to the customers that are using it”

The YouTuber highlights Michael Burry's new position in Block Incorporated, suggesting Burry saw value after the stock experienced a sharp decline. He states that the business is not fundamentally troubled, implying the low price presented a buying opportunity.

“block Incorporated another one that was down really sharply from the pandemic hit a low earlier this year and this is not a business that is fundamentally in trouble it's just a matter of what's the appropriate price to pay for the stocks he obviously saw a value there”

Hoium maintains a buy rating on Block, citing strong long-term gross profit growth, particularly from Cash App (up 25% YoY). He highlights the company's ability to integrate its Square and Cash App segments to increase margins and the increasing profitability of older Cash App user cohorts. Despite concerns about CEO Jack Dorsey's capital allocation, the current metrics and valuation (under 24x forward P/E) are attractive.

“I think the metrics are just too good to pass up this is one of the most sticky companies in the payment space it's really what makes a lot of small businesses run forward price earning multiple is under 24 Enterprise Value to sales is only about two right now so I think this is a pretty good value.”

The analyst believes Block (SQ) is a 'screaming buy' for long-term investors due to its strong ecosystem spanning both consumer (Cash App) and business (Square) segments, which offers potential for future cost reductions and increased subscription revenue. Despite past volatility, the company's valuation metrics, such as a forward P/E of 23.6 and an Enterprise Value to Free Cash Flow of 21, are considered reasonable given its growth potential in high-margin subscription services. The main risk identified is management's historical inability to focus on profitability, suggesting a potential need for leadership change.

“I think block still has that potential so that's what I'm going to dig into today.”

Travis Hoium recommends Block due to its strong financial ecosystem, combining the growing Cash App (consumer side) and Square App (business side). He highlights the positive trend in adjusted EBITDA, indicating strong cash flow, and believes the company is well-positioned in the digital financial experience market for long-term growth.

“I just love their position and I think this is a company that's going to be great to hold for 5, 10, 20 years in the future”

The analyst owns Block shares and does not intend to sell them, citing strong growth in both the Cash App and Square segments. He highlights improving operating leverage, double-digit revenue growth, and the increasing profitability driven by subscription-based revenue and transaction fees, despite the market's negative reaction to recent earnings.

“I own shares I don't intend on selling them anytime soon this quarter was another step in realizing that long-term value.”

The YouTuber likes Block (parent company of Square and Cash App) for its long-term growth potential, driven by increasing transaction volumes in its merchant ecosystem and the vision for Cash App to be a central financial hub. He acknowledges current negative net income but believes the company's sticky business model and potential for cost management will lead to future profitability.

“I just love this company The Branding the long-term growth story is still intact it's a little harder to make the value proposition given that the fact that they are generating negative net income right now but I still like the future long term for this growth story”

The YouTuber is bullish on Block (SQ) due to strong earnings, particularly the 51% gross profit growth in Cash App and its increasing contribution to overall gross profit. They highlight the company's ability to grow internationally and the significant increase in subscription and service-based revenue, which is a key long-term profit driver. Despite the stock being down, the underlying business fundamentals remain strong, making it an attractive investment.

“I don't I don't see anything terrible about these results if you were if you were just flown in and said hey look at these results and have no context about what's going on at the stock price I think you would say hey this is a great company they're growing like crazy I'm in.”

The analyst argues that Block, despite its significant price drop, has a solid business model with two strong segments: Square for merchants and Cash App for consumers. The company is financially sound with a strong balance sheet and positive free cash flow. Valuation metrics, particularly the forward P/E ratio, suggest the stock is currently undervalued compared to its historical highs, offering substantial return potential.

“nach der tradedesk ist auch Block eine dieser Aktien die aus meiner Sicht kein Luftschloss sind sondern wo das Geschäftsmodell durchaus Sinn macht wo auch die Fundamentaldaten soweit überzeugen dass ich jetzt schon sagen würde ja in so eine Aktie kann man investieren wenn es denn in die eigene Anlagestrategie passt”

The analyst advises avoiding Block (formerly Square) despite its seemingly low P/S ratio compared to others, because its operating margins are extremely weak and projected to decline further. The company's focus on blockchain and Bitcoin introduces high uncertainty and risk, making it difficult to assess future profitability and growth.

“ich würde in beiden fällen lieber auf die gestandenen altgedienten tech aktien setzen”

The YouTuber holds a small position in Block (formerly Square) and is not adding to it despite a recent short attack. While acknowledging some valid criticisms from Hindenburg Research regarding potential regulatory issues and the Afterpay acquisition, he believes the short report engages in 'cherry-picking' and that Block's underlying gross profit growth remains strong. He notes that the stock price has already partially priced in the short attack's allegations, and while uncertainties remain, he sees no immediate reason to sell his existing shares.

“Ich werde erstmal meine Block Aktien halten kaufe aber nicht nach es zeigt auch wieder diese short report das ist eben viele intransparenzen gibt und das auch so jemand Anbieter Zahlungsdienstleister man hat es bei Wirecard sicherlich eine sehr extrem Form gesehen aber auch bei Block sieht man jetzt wieder es gibt ja durchaus einige Herausforderungen das ist ein sehr regulierter Bereich und auch in einigen Bereichen in meiner etwas intransparenter Bereich und die Rendite Erwartung die man an eine solche Aktie hat sollte genau diese Risiken ausgleichen so zumindest da meine Haare angehtsweise deswegen halte ich die Position sie ist bei mir relativ klein ist natürlich auch etwas kleiner geworden dadurch dass der Kurs jetzt zuletzt nachgegeben hat ich kaufe jetzt aber auch nicht aktiv nach dafür fehlt es mir dann doch noch an Gründen auch in dem aktuellen Umfeld und da muss man auch sagen ist die blockachse definitiv eine die gar nicht so einfach zu bewerten ist eben wegen dieser Bitcoin Anteile halten und wegen dieser Unsicherheiten”

The analyst views Block as well-positioned for Web 3.0 due to its peer-to-peer payment system and cryptocurrency platform, aligning with the decentralized nature of Web 3.0 where users own their data and assets. Despite the CEO's skepticism about venture capital's role in Web 3.0, Block is actively positioning itself. The stock is trading cheaply at 3.2 times price-to-sales, with analysts projecting 17.7% annualized sales growth and an average target price over $200.

“Block is already positioned to take the lead in this with its p2p payment system and cryptocurrency platform and the founder CEO Jack Dorsey has been the biggest champion of Bitcoin and that blockchain revolution.”

The YouTuber identifies Square as a high-conviction play within the ARK Fintech Innovation ETF, noting its significant weighting in the fund (nearly 11%) and its involvement in innovative fintech areas like blockchain, digital wallets, and transactions. He believes Kathy Wood's high conviction in Square justifies adding it to his 'super ETF'.

“here we see square inc ticker sq is nearly 11 percent of this fund and we know that square touches a lot of those innovative fintech ideas like like the blockchain digital wallets and transactions so this fund has 3.6 billion dollars in assets and almost 11 percent of that in square alone”