We recently published a list of 10 Best Cash App Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Block, Inc. (NYSE:SQ) stands against other best cash app stocks to buy according to hedge funds.
The mobile payment service Cash App has grown significantly throughout the years, and in 2022 it was valued at $138 billion, up from $40 billion in 2020. Although its earnings increased to $2.95 billion, showing consistent yearly growth since 2018, its revenue decreased to $10.6 billion in 2022 from $12.3 billion in 2021, despite this remarkable valuation. Cash App’s user base grew by 7 million from 2021 to 51 million in 2022, due to its user-friendly interface and array of financial services, which include peer-to-peer payments, Bitcoin investments, and cash card features. The four U.S. states of Texas, California, Florida, and New York together account for 48.75% of Cash App’s user base, with over half of its customers concentrated in these states. As of 2020, there were just 10,000 active Android users in the United Kingdom, and its market share was less than 0.05%. In 2022, the platform handled more than 528 million transactions, demonstrating its increasing use. Cash App is positioned as a major participant in the digital payment ecosystem, particularly in the U.S. market, due to its excellent features and rising profitability.
As per findings by Apptopia, Cash App was the most downloaded payment app between April and May 2020, with a 20.1% increase in U.S. downloads, reaching around 4 million within that time frame. Additionally, usage increased, with roughly 250 million sessions in April—the second-highest number among payment applications. As people looked for alternatives to in-person banking and provided financial support to friends and family, the pandemic caused a shift toward digital transactions, which is what is responsible for this surge.
According to Block, Cash App’s parent company, in a manner that many financial institutions have not been able to, Cash App has expanded access to the financial system and enabled a wide range of consumers to send, spend, save, invest, and comprehend their money more effectively. Its goal is to “redefine the world’s relationship with money by making it more relatable, instantly available, and universally accessible,” which is in line with this. Block believes Cash App can keep improving the economy both today and in the future.
However, Cash App has also faced challenges. Recently, under Jack Dorsey’s leadership, Block agreed to a $175 million settlement with the CFPB, which included a $55 million fine and up to $120 million in reimbursements for Cash App users. Allegations of widespread fraud and insufficient customer service on the platform were addressed in the settlement. The CFPB charged Cash App with facilitating fraud, sending users to banks, and neglecting to look into questionable transactions. Cash App accounted for over half of Block’s 2023 gross profit, with over 56 million accounts. In addition, after 48 state regulators joined together, Block paid an $80 million fine for money laundering violations.
The press release stated:
“While we strongly disagree with the CFPB’s mischaracterizations, we made the decision to settle this matter in the interest of putting it behind us and focusing on what’s best for our customers and our business,”
Methodology
For this article, we reviewed multiple reliable websites and videos that discuss stocks available on Cash App. From there, we formed an initial list of the 20 Best Cash App Stocks To Buy According to Hedge Funds. From the resultant dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 900 hedge funds in Q3 2024 to gauge hedge fund sentiment for stocks.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
People using the Cash App paying for goods and services, highlighting the impact the of the company’s payment tools.
Block, Inc. (NYSE:SQ)
Number of Hedge Fund Holders: 64
Block, Inc. (NYSE:SQ) was established in 2009 and offers businesses payment services as well as associated services. A person-to-person payment network called Cash App was also introduced by the business. Square processed a little over $200 million in payments in 2023.
Block, Inc. (NYSE:SQ) keeps establishing itself as a fintech leader due to its promising growth and solid financial results. The business reported a 19% year-over-year increase in gross profit to $2.25 billion in its most recent Q3 2024 financial release. The Square and Cash App areas both saw strong growth. Significant gains in adjusted operating income and EBITDA helped Block reach its highest quarterly profitability ever, leading to an upward revision of its full-year expectations for these metrics. This shows confidence in its operating plan and implementation.
The Cash App category continues to be a strong performer, with higher engagement and monetization resulting from improved attach rates for financial items like paycheck deposits. In 2025, expansion is anticipated to be further accelerated by investments in growth efforts, especially in go-to-market methods. However, challenges still exist. Cash App’s moderate monthly active user growth, which is expected to end the year at about 57 million, is a reflection of challenges with user acquisition. Block, Inc. (NYSE:SQ) places a higher priority on platform health and engagement than on rapid user acquisition, thus this slowdown is partially purposeful. Future operations may also be impacted by regulatory concerns in the banking and fintech industries.
Short-term obstacles include the development of Cash App Borrow and the delays in enjoying the benefits of transaction costs, both of which are now anticipated to fuel growth beginning in 2025. The benefits of new products aren’t fully appreciated yet because their distribution is still in its early phases, like the Cash App Card’s collaboration with Afterpay.
On January 3, 2024, the stock jumped 5% after Raymond James upgraded it to Outperform. The bank set a price objective of $115 above the $91.20 price due to its favorable value.
In 2025, the bank expects Block Inc.’s (NYSE:SQ) seller gross payment volume (GPV) to increase by at least 10%. Raymond James expects the gross profit to continue to grow even if Cash App’s development has slowed.
Stephen Mandel’s Lone Pine Capital was the largest stakeholder in the company among the funds in Insider Monkey’s database at the end of Q3 2024. It owns 7.67 million shares worth $514.92 million as of Q3.
Overall, SQ ranks 8th on our list of best cash app stocks to buy according to hedge funds. While we acknowledge the potential for SQ to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SQ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
