Block Inc (SQ)

Technically, it looks awful and revenue growth is slowing. Profit margin isn't expanding.

12-month price target of $83.50, nice long runway. If there's a company that can disrupt payment or banking systems, it's this name. Very strong growth prospects. Agreed to buy Afterpay. February earnings missed on top and bottom, though they did increase guidance (probably due to Afterpay).

It rallied from October 2023 to December 2024, but has recently sold off. A few weeks ago, they reported a quarter that some didn't like due to weak guidance. Shares dropped 18% in one day and is now 40% off highs. The stock is too cheap now and oversold

Loves that it's a platform business. Plays in a space that competitors are too big for or the space is too small. Ability to build technology and adapt revenue streams with the times. Proven to execute extremely well. Has gone head to head with AMZN and won. Performance has been great, though an up-and-down ride at times. Can hold for a long time. No dividend.

Much better buying opportunity and growth prospects than the Mag 7.

Has been downgraded, but managers are too strong for that. He'd buy on this weakness.

Fintech is a tough space. Sometimes the best answer is the simplest, and that's to buy Visa or MA. SQ has an interesting story and ecosystem. When you buy, you always have to compare. He can't see selling a Visa to buy this.

They just reported online gross payments up 11% YOY while buy now/pay later was up 25% YOY. 

A lot of tech stocks will never see their highs again. Best hope here is mid-$60s. On a bit of a downslide. Potential to lose half its value very quickly. Not a buy the dip and trade. If drops below $53, reduce; below $50, get out.

SQ is now trading at 31x times' Forward P/E. In the 2Q, SQ’s revenue grew 25% to $5.53B, beating the estimates of $5.1B and EPS was $0.39 beating estimates of $0.37. The cash app users remain solid, up 15% to around 54 million monthly activities. We think the share price overreacted somewhat because of overall gross profit growth deceleration from 32% in Q1 to 27% in Q2, and expected to further decelerate to the 21% range. The gross payment volume (GPV) also decelerated significantly to only 12% growth compared to more than 20% last year. The balance sheet is strong, with net cash of around $600M. Overall, the quarter was okay, but a deceleration in growth in operating metrics worries investors. However, we think the Square payment ecosystem is solid, we think SQ is a HOLD for now. Block's healthy revenue growth and improving trends for operating margin should pave the way for profitability, despite decelerating near-term volume growth. Management raised guidance again to deliver Ebitda of $1.5 billion for 2023, a gain of $25 million vs. a loss of $115 million previously, even as some operating expenses from 1Q were pushed forward. Diversification of revenue streams is positive, with each vertical software offering now generating more than $100 million in annualized gross profit.
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Financial services & payments company (hardware & software).
Current share price well down from highs.
Recent short seller reports very hard on the business.
Market concerned on viability of the company (no profits).
Jury is out on the prospects for the business.

A short-seller this week hammered shares. But young people like Block for its app and that's why Wall Street loves it, though if the Fed stays hawkish nothing can save this or fintech. If Block were regulated like a big bank, SQ would be overvalued. So, Block isn't overvalued as it appears. Also, he doesn't see Block's partners dropping then. That said, the short-seller has a good track record and raises some valid question. He doesn't blame anyone selling this.

Not as risky as other banks (considering today's SVB collapse), it is the young person's bank, but shares are expensive.