We recently compiled a list of 10 Best Digital Payments Stocks To Buy Now. In this article, we will look at where Block, Inc. (NYSE:SQ) ranks among the best digital payments stocks to buy now.

Digital Payments Industry: An Analysis

It was the global pandemic that catalyzed the contactless ways of payment around the world. As physical stores shut down, digital payment methods became the norm with shoppers looking for a less personal and more digital interaction. According to a poll by the digital payment leader Mastercard, more than half of Americans opted for some form of contactless payment such as tap-to-go credit cards and mobile wallets amid COVID. The trend has continued and is here to stay since more than two in every three in-person transactions globally on Mastercard’s network were reported to be contactless in 2023.

McKinsey’s 2023 Digital Payments Consumer Survey reveals that online purchasing took the lead among all other kinds of digital payments among consumers. With the return of in-person shopping, using a device to pay at retail places by scanning a bar code with it or tapping it on a point-of-sale device, also known as in-store digital payments, has grown. Simultaneously, the in-app digital payments and peer-to-peer payments have risen since 2021. This reflects the already mainstream consumer digital payments which are and will continue to evolve.

The other market which tends to be highly addressable and promising is the B2B digital payments market with businesses looking for more ways to drive efficiency and engage in cross-border business transactions. This market was valued at $1.69 trillion in 2023 and is expected to grow at a compound annual growth rate of 9.38% from 2024 to 2033, as reported by Brainy Insights. Global Payments CEO, Cameron Bready, mentioned B2B payments as the next frontier for payments, with significant growth in the digitization of B2B payments. In an interview with CNBC, he emphasized this big opportunity by predicting the B2B market to be 3 to 4 times the size of the consumer market. According to him, this market remains highly fragmented and under-penetrated.

Our Methodology:

We first used a stock screener and mobile payments ETFs to make an extended list of the relevant companies with the highest market caps. Moving on, we shortlisted the top 10 stocks from our list which had the highest number of hedge fund holders. The 10 best digital payments stocks to buy now have been arranged in ascending order of their hedge fund holders as of Q2 2024.

At Insider Monkey we are obsessed with 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).

Block, Inc. (NYSE:SQ)

Number of Hedge Fund Holders: 59

Block, Inc. (NYSE:SQ) is a technology company focused on financial services. It is made up of Square, Cash App, Spiral, TIDAL, and TBD, all of which help people navigate the barriers to accessing the economy. Square offers an integrated ecosystem of commerce solutions, business software, and banking services for sellers to grow their business while Cash App allows sending, spending, or investing money in stocks or bitcoin. Spiral advances the use of Bitcoin by building and funding free, open-source projects whereas TIDAL is a platform for musicians and their fans. TBD eases access to Bitcoin and other blockchain technologies.

The firm’s two primary ecosystems Square and Cash App remain its core strengths. While Square was initially introduced to help sellers accept card payments, it now offers more than 30 distinct products and services to help them grow their businesses. Block has driven continued and sustained long-term growth by adding new sellers efficiently and cross-selling its products and services. In the year ended December 31, 2023, over 4 million sellers used the Square ecosystem to make 4 billion individual sales transactions totaling $209.6 billion of Square Gross Payment Volume. Simultaneously, Cash App recorded 56 million monthly transacting activities across the US and the U.K., as of December.

Block, Inc. (NYSE:SQ) recently delivered a strong second quarter with its gross profit going up 20% year-over-year. Square gross profit increased 15% year-over-year while Cash App’s gross profit climbed 23% year-over-year. For the 12 months ending in June 2024, Block had $1.43 billion in adjusted free cash flow, almost doubling from the preceding year.

The strength of the primary business segments, a strong financial performance, the ability to generate substantial free cash, and growth potential underscore the importance of Block, Inc. (NYSE:SQ) as a promising digital payments stock. Block has 59 hedge fund holders, as of Q2 2024. Catherine D. Wood’s ARK Investment Management was the leading shareholder among these hedge funds.

Overall SQ ranks 8th on our list of the best digital payments stocks to buy. While we acknowledge the potential of SQ as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued 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.

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Disclosure: None. This article was originally published on Insider Monkey.