3. Block, Inc. (NYSE:SQ)
Average Price Target Upside: 34.39%
5-Year Revenue CAGR: 42.87%
Number of Hedge Fund Holders: 59
Block, Inc. (NYSE:SQ), formerly known as Square, Inc., is a prominent American technology company. The organization operates through two primary segments, Square and Cash App. The Square segment focuses on providing a wide range of commerce products designed for various business needs, including services for restaurants, retail, online sales, and invoicing.
The segment improves business operations with features such as loyalty programs, marketing tools, team management, and payroll services. On the other hand, the Cash App segment empowers individuals with financial tools, that enable peer-to-peer payments, Bitcoin transactions, stock investments, and flexible payment solutions like Pay in 4.
With a consensus Buy rating from 44 analysts, the stock’s average price target of $90.00 represents an upside of 34.39%, as of September 27. It takes its place among our best revenue growth stocks to buy according to analysts.
In the most recent quarter, Block (NYSE:SQ) reported a net income of $195.3 million, translating to earnings of $0.31 per share. This marks an impressive 91% increase compared to the same period last year. The Cash App division emerged as a driver of profitability, generating $1.3 billion in gross profit, which is a 23% increase year-over-year.
The company’s overall financial health is further illustrated by the reported adjusted free cash flow of $1.43 billion for the twelve months ending in June. The figure is double that of the prior period and accounts for 57% of adjusted EBITDA, which shows the company’s ability to generate cash effectively.
Columbia Contrarian Core Fund stated the following regarding Block, Inc. (NYSE:SQ) in its Q2 2024 investor letter:
“Block, Inc. (NYSE:SQ) – It is hard to pinpoint why the stock moved lower in the last two months of the quarter, but the most likely reason seems to be simply that investor sentiment on the stock remains generally quite negative for the near term. Investors seem to be taking recent comments from Jack Dorsey (CEO of Square, who also heads Square’s parent company, Block) to mean that a lot still needs to be fixed, rather than the perspective that Mr. Dorsey is being honest and straightforward that things weren’t working and that Square now has a clear plan and a lot of urgency behind its initiatives. The reinvigoration of Square appears very real, with a bold vision to become a generational technology company. The organization is aligned on making Square and Cash App a vertically integrated commerce platform for both sellers and consumers. For Square, this means achieving a growth rate similar to its early days with much better technology while, for Cash App, success is defined as becoming the leading primary bank for those making less than $150,000 per year, along with significant success combining the two ecosystems. The experimentation and innovation culture is back with buy-in across the organization, with a key focus on engineering discipline and exceptional products. This discipline had been lost and is now coming back and should create much better product experiences that are customer-problem focused and enable the company to regain its prior pace of market share gains.”
