If Jack Dorsey Focuses, Block Stock Is a Buy

When it comes down to the fine point, is there really a big difference between Block (NYSE:SQ) stock and Square?

Square, Inc. (SQ) logo seen displayed on smart phone. Square, Inc. is a financial services, merchant services aggregator, and mobile payment company
Source: IgorGolovniov / Shutterstock.com

Not really. But I have to confess I like the cash payment platform better now, than I did when the company was just known as Square.

Square had a great run as a fintech stock, best known for its white plastic dongle that allowed  vendors big and small to process credit card payments on a smartphone or tablet. Then it made a huge splash by investing in Bitcoin (CCC:BTC-USD) and began allowing customers to be paid in bitcoin when they made transactions through the company’s Cash App.

Now the company’s known as Block, an indication that the former Square will focus even more on blockchain technology and all the applications and uses that may come with it. And that’s great.

But my new admiration isn’t just because Block has a new name. I’m also bullish on the company because it finally has a full-time CEO – or at least, a CEO who isn’t doing double duty by trying to run another company.

It’s All About Jack Dorsey

Before Block was even a glimmer in our eyes, Jack Dorsey was a co-founder and first CEO of Twitter (NYSE:TWTR) for several years. But by 2008 he stepped away from the top job, leaving CEO duties to Evan Williams.

But Twitter stock, which began trading publicly in September 2013, didn’t do well. After starting in launching at more than $40, TWTR stock  could be had for about $30 in June 2015, when Williams stepped down and Dorsey took over again.

Ordinarily, I would be perfectly fine with Dorsey coming back to Twitter. But in this case, I had my doubts only because Dorsey was also running Square, which launched in 2010.

So, you’ve got one CEO running two big companies. As a shareholder, I would have a lot of questions about that arrangement.

On Nov. 29, Dorsey announced his resignation as Twitter CEO, and he was replaced by Parag Agrawal, the company’s chief technology officer. He stayed on with Block.

Twitter may get more publicity because of its social media roots, but for my money I think the now-named Block is the much more exciting company for investors. And now that Dorsey is running it without distraction from Twitter, I like it even more.

SQ Stock at a Glance

One of the things I’ve always liked about SQ is that it really fits well with how people like to handle money. Or to put it more exactly, it fits will with how people don’t like to handle money.

Given a choice, many people would rather skip carrying dollars and coins and pay for things digitally. When Square launched a decade ago, it was set up beautifully to manage credit card and debit card payments. That gave everyone from food vendors to Girl Scouts the ability to take electronic payments.

Now Cash App, and services like the Venmo service offered by PayPal (NASDAQ:PYPL) take that a step further. It’s easy to buy and pay for services using either of those platforms, so you hardly even need the old Square dongle any longer.

That’s why it’s important for Block to look forward if it’s going to continue to be one of the best fintech stocks in the market.

Third-quarter earnings were a mixed bag. Revenue was $3.8 billion, which missed analysts’ estimates of $4.4 billion. Earnings met expectations of 37 cents per share.  Gross payment volume of all payments processed on the company’s platform was $45.4 billion, which was a 43.2% increase from a year ago.

The Bottom Line

SQ stock is down 24% so far on the year, but if you’re a long-term investor there’s some reason for optimism. The company is working on a decentralized exchange for buying Bitcoin, and its working on a crypto hardware wallet.

Both projects have the potential to help push Block stock into the next phase of its development from an exclusively fintech company to a financial conglomerate that embraces blockchain.

SQ stock will be fine. As long as Dorsey keeps his focus on the company and doesn’t allow his attention to wander to a different effort.

On the date of publication, Patrick Sanders was long BTC-USD. He did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Patrick Sanders is a freelance writer and editor in Maryland, and from 2015 to 2019 was head of the investment advice section at U.S. News & World Report. Follow him on Twitter at @1patricksanders.


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