Stockchase Opinions

Jim Cramer - Mad Money Block Inc SQ-N BUY ON WEAKNESS Apr 08, 2024

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

$78.350

Stock price when the opinion was issued

Technology
It's the ideal tool to help you make quicker, more informed decisions for managing and tracking your investments.

You might be interested:

premium

🔒 Premium Content Alert – This buzzing stock opinion is accessible only to Premium members

Discover an exclusive list and analysis of the stocks that are trending on social medias—accessible only to our Premium subscribers. With a keen focus on the stocks that are setting social media ablaze, this weekly feature offers an invaluable lens through which to evaluate market movers. Say goodbye to the endless scroll through social media timelines; we curate the buzz so you can invest your time as wisely as your money. Unlock Premium Now.

TOP PICK

Square, Inc. builds tools to empower businesses and individuals to participate in the economy. Sellers use Square to reach buyers online and in person, and to manage their business. Square has offices in the United States, Canada, Japan, Australia, Ireland, Spain and the UK. Social media mentions are up 225% in the past 24h.

HOLD

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.


BUY
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

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.
Unlock Premium - Try 5i Free

SELL ON STRENGTH

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.

BUY

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

WAIT
Downgrade today from MS. Upside potential to $100?

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.

TOP PICK
18x PE.

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.

(Analysts’ price target is $85.78)
premium

🔒 Premium Content Alert – This buzzing stock opinion is accessible only to Premium members

Discover an exclusive list and analysis of the stocks that are trending on social medias—accessible only to our Premium subscribers. With a keen focus on the stocks that are setting social media ablaze, this weekly feature offers an invaluable lens through which to evaluate market movers. Say goodbye to the endless scroll through social media timelines; we curate the buzz so you can invest your time as wisely as your money. Unlock Premium Now.

TOP PICK

Block, Inc. (formerly Square, Inc) is an American technology company offering financial services to consumers and businesses. Founded in 2009 by Jack Dorsey, it leads the U.S. point-of-sale systems market. As of 2023, Block serves 56 million users and 4 million businesses, processing $228 billion in payments annually. Social media mentions are up 27% in the past 24h.

BUY ON WEAKNESS

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