We came across a bullish thesis on Block, Inc. (XYZ) on Substack by Long-Term Pick. In this article, we will summarize the bulls’ thesis on XYZ. Block, Inc. (XYZ)’s share was trading at $65.30 as of Feb 28th. XYZ’s trailing and forward P/E were 14.32 and 14.27 respectively according to Yahoo Finance.
A customer interacting with a point-of-sale terminal, demonstrating the impact of targeted loyalty marketing.
Block (XYZ) has emerged as a hidden gem in fintech, demonstrating strong growth across its key segments—Square and Cash App. The company reported $8.89 billion in gross profit for 2024, an 18% year-over-year increase, with Square contributing 15% growth and Cash App surging by 21%. Adjusted EBITDA skyrocketed to $3.03 billion, up 69%, while adjusted operating income expanded more than 4.5 times to $1.61 billion. Free cash flow also saw a dramatic improvement, reaching $2.07 billion compared to just $515 million in 2023, showcasing Block’s enhanced profitability and operational efficiency.
Jack Dorsey emphasized Block’s transformation into a full commerce platform, highlighting AI automation, Bitcoin infrastructure, and open-source innovation as key growth enablers. Customer engagement deepened across Square and Cash App, with gross profit retention exceeding 100%. Notably, Square’s Gross Payment Volume (GPV) grew 10% in Q4 2024, and Cash App’s paycheck deposit actives surged to 2.5 million, a 25% increase year-over-year. CFO Amrita Ahuja reinforced the company’s disciplined execution, reporting a 36.5% score on the Rule of 40, a seven-point improvement from the previous year.
Looking ahead to 2025, management projects a minimum of $10.22 billion in gross profit, expecting at least 15% year-over-year growth despite FX headwinds. Cash App is poised for further acceleration as Block expands Cash App Borrow, integrates Afterpay on Cash App Card, and increases marketing investments. Improved underwriting and state expansions will allow for higher Cash App Borrow limits, while Square GPV and gross profit will benefit from strategic marketing, partnerships, and product innovations.
The company projects adjusted operating income of $2.1 billion for 2025, accompanied by a 240-basis-point margin expansion. With this strong momentum, Block’s valuation stands at $126 per share, supported by a forward five-year EPS growth rate exceeding 24%. This positions Block as an attractive investment opportunity, with its current stock price offering a favorable risk/reward profile, backed by strong free cash flow, market dominance, and ongoing expansion in financial services.
Block, Inc. (XYZ) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 81 hedge fund portfolios held XYZ at the end of the fourth quarter which was 64 in the previous quarter. While we acknowledge the risk and potential of XYZ as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than XYZ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.