10 Undervalued Stocks to Invest in According to Goldman Sachs

3. Block, Inc. (NYSE:XYZ)

Forward P/E ratio: 11.15

Number of Hedge Fund Holders: 81

Block, Inc. (NYSE:XYZ) is a financial technology company that provides digital payment, banking, and commerce solutions for businesses and consumers. The company operates through key segments, including Square, which offers point-of-sale and financial services for merchants, and Cash App, a peer-to-peer payment platform with banking and investing features. XYZ also owns Tidal, a music streaming service, and TBD, an open developer platform focused on decentralized financial solutions. The company serves small businesses, enterprises, and individual consumers, leveraging technology to enhance digital transactions, financial accessibility, and cryptocurrency integration. XYZ ranked fourth on our recent list of 10 Best Growth Stocks Under $100 to Buy Now.

Block, Inc. (NYSE:XYZ) experienced substantial growth in 2024, generating $8.89 billion in gross profit – an 18% increase from the previous year. Both Square and Cash App contributed to this expansion, with Square’s revenue rising by 15% and Cash App’s by 21%. Customer engagement remained strong, as gross profit retention for both platforms exceeded 100%. The company’s Gross Payment Volume (GPV) maintained upward momentum, increasing 10% year over year in the fourth quarter, with US growth accelerating by 200 basis points to 6.9%. Meanwhile, Cash App’s active paycheck deposit users reached 2.5 million in December, reflecting a 25% annual increase. Operational efficiencies significantly boosted profitability, with Adjusted EBITDA surging 69% to $3.03 billion and Adjusted Operating Income climbing over 4.5x year over year to $1.61 billion.

Looking ahead to 2025, Block, Inc. (NYSE:XYZ) projects at least 15% gross profit growth, targeting a minimum of $10.22 billion. The company plans to enhance Cash App’s functionality by expanding Cash App Borrow, integrating Afterpay with the Cash App Card, and ramping up marketing efforts. XYZ is expected to see continued GPV and gross profit improvements, driven by customer retention and acquisition initiatives. The company remains committed to disciplined expansion while controlling costs, keeping its workforce under 12,000 employees. Profitability remains a priority, with the company aiming for $2.1 billion in Adjusted Operating Income, equating to an approximately 21% margin. With a forward P/E ratio of 11.15, XYZ is one of Goldman Sachs’s undervalued stocks.