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Where Will Block Be in 5 Years?
SQBLOCK(SQ) The Motley Fool·2024-11-30 23:06

Core Insights - Block has seen a modest stock increase of 32% over the past five years, significantly underperforming the S&P 500, which returned 107% in the same period [1] Group 1: Business Strategy - Block's management is focused on enhancing the integration between Square and Cash App to create a more independent payment system, reducing reliance on major networks like Visa and Mastercard [2] - The ideal transaction scenario for Block involves Cash App users purchasing from Square merchants, utilizing payment methods like Cash App Pay, Cash App Card, or Afterpay [3][4] - By bypassing major card networks, Block aims to retain a larger share of transaction fees, which is crucial for its growth as a fintech disruptor [4] Group 2: User Base and Market Position - As of September 30, Block had 57 million monthly Cash App users and 24 million Cash App Card holders, with Square processing 59.9billioningrosspaymentvolumeinQ3[5]−Despitethesefigures,Blockremainsasmallplayerinavastmarket,withatotalpaymentvolumeof59.9 billion in gross payment volume in Q3 [5] - Despite these figures, Block remains a small player in a vast market, with a total payment volume of 6.5 trillion in the same period [5] Group 3: Bitcoin Initiatives - Block's CEO, Jack Dorsey, is a strong proponent of Bitcoin, viewing it as a critical focus for the company [6] - The company is pursuing various Bitcoin-related initiatives, including a hardware wallet and mining equipment, and holds 530millioninBitcoinonitsbalancesheetasofSeptember30[7]−Whilesomecriticsseethisfocusasadistraction,supportersarguethatitalignswithBlock′smissiontoenhancefinancialfreedomandeconomicempowerment[8]Group4:FinancialPerformanceandValuation−Blockisexperiencingrisingprofits,withexpectationsofnearly530 million in Bitcoin on its balance sheet as of September 30 [7] - While some critics see this focus as a distraction, supporters argue that it aligns with Block's mission to enhance financial freedom and economic empowerment [8] Group 4: Financial Performance and Valuation - Block is experiencing rising profits, with expectations of nearly 1.6 billion in adjusted operating income for 2024, representing a 344% increase from the previous year [9] - The stock has seen a 24% increase in November, and despite this rise, it trades at a price-to-sales ratio of under 2.4, which is less than half the average valuation over the past five years [10] - Given its current trajectory, Block is expected to potentially outperform the S&P 500 by the end of 2029 [11]