Block, Inc. (XYZ): A Bull Case Theory
Kaspi.kz (KSPI) has been gaining attention as a potential young stock to buy and hold for the long term. With Block, Inc.’s share price trading at $75.82 as of September 8th, investors are eager to understand the bullish thesis behind this company. According to Yahoo Finance, Block’s trailing and forward P/E ratios were 16.20 and 20.33 respectively, indicating a promising outlook for the stock.
Despite a disappointing Q1 that led to a reduction in full-year guidance, Block saw a significant rally of nearly 75% from post-earnings lows. This surge was fueled by positive Cash App inflows, successful Square and Cash App product launches, improving Bitcoin sentiment, and the announcement of Block’s inclusion in the S&P 500 index. The company’s strong Q2 results further reinforced this momentum, with gross profit growth accelerating to 14% and adjusted operating margins expanding to nearly 22%.
Square, a key component of Block’s business, showed encouraging signs with U.S. GPV growth rebounding to 7% and international GPV surging 24%. This growth was broad-based, particularly in the food and beverage and retail sectors, signaling a return to market share gains. However, gross profit expansion was moderated by higher processing costs, hardware investments, and potential lower take rates from upmarket success.
On the other hand, Cash App’s performance painted a more nuanced picture. While Borrow and BNPL originations saw sharp increases, underlying spending-driven gross profit growth remained modest at 7%. This suggests that future earnings will increasingly rely on lending rather than spending, with Cash App Borrow originations projected to rise significantly by Q4 2025.
Looking ahead to 2026, Block is expected to achieve consolidated gross profit growth of 15% with a 22% adjusted operating margin and EPS of $3.09. While the company’s valuation appears reasonable at sub-24x 2026 EPS, there are some risks to consider. These include lending expansion risks, margin pressures, and uncertainty surrounding MAU growth.
In conclusion, Block, Inc. continues to show promise as a strong contender in the FinTech industry. Despite some challenges and uncertainties, the company’s growth across Square and Cash App, margin expansion, and free cash flow improvement are key factors driving investor interest. As the stock price continues to climb, it will be interesting to see how Block navigates these challenges and capitalizes on its growth opportunities in the years to come.
