Now that the dust is starting to settle on earnings season, it’s time to reexamine Block (NYSE:SQ). A significant amount of volatility has marked SQ stock, especially after its name change from Square, a move that reflects its growing interest in the blockchain space.
It launched its first product in 2009: Square, an application that allows users to take credit card payments with a tablet or phone. Since then, Block has expanded into many different areas. Its success can be attributed to its innovative payment solutions for both businesses and consumers, plus its focus on community and customer service.
Despite its substantial success, there are still some that look at the company with concern. For one thing, blockchain is still a new and volatile space. Investors are also concerned about geopolitical tensions and interest rate hikes, so they’re retreating to safer stocks.
However, based on three factors ranging from the balance sheet to its executive board, Block offers great upside at the moment. It comfortably surpassed analyst estimates in the fourth quarter and its shares soared. After a few weeks, SQ stock has cooled, so it’s time to add to your position.
Jack Dorsey and His Crypto Ambitions
Blockchain is revolutionizing the financial sector. Companies and organizations use it to create decentralized networks that are transparent, scalable and efficient.
It can change how we think about financial transactions in a world where trust is at its lowest. Developers can also use blockchain to make other industries more efficient and secure. The future of blockchain is still uncertain, but it’s becoming increasingly popular for businesses to use it for their operations.
Jack Dorsey is a long-time blockchain enthusiast who has been named one of the most influential people in the industry. He stepped down from his role as CEO of Twitter (NYSE:TWTR) to work more closely on the concept.
Dorsey’s work has led to some of the most innovative and influential products that we use today. Much like Elon Musk of Tesla (NASDAQ:TSLA), he is iconic and investors pay attention to his moves. The fact he has put his weight behind Block means something to Wall Street.
Block’s All-in-One Financial Ecosystem
The rise of digital financial apps has brought about a new era in financial technology (fintech). Block addresses these needs with divisions including Square, Cash App, music-streaming service Tidal and TBD, which will focus on cryptocurrency.
Aforementioned Square is used by small businesses to manage finances, payroll and marketing. Its transaction tools can also help speed up business processes.
Meanwhile, Cash App serves the consumer side. The app allows users to process various types of payments, including credit and debit cards. It also includes a payment method similar to a bank card. Cash App is popular because of its functionality, providing cash transfers, payment cards and accounts.
Cash App usage was off the scale during the pandemic as digital payments became more necessary. In the fourth quarter of 2021, it generated 18% more revenue and 37% higher profits year-over-year (YOY). Although growth is leveling off, it is still progressing at a decent clip.
More Growth Coming for SQ Stock
It’s easy to forget it’s still the early days for Block. It has a long way to go, both in terms of global expansion and product growth. But so far, investors are especially happy about its acquisition of Afterpay, a leader in “Buy Now, Pay Later” (BNPL) payments.
Block hopes Afterpay will create a symbiotic relationship between the financial segments of their business. It wants its apps to grow and maintain this user base while it develops highly specialized services and technology.
There are also tremendous cross-sales opportunities between its products. For example, users can save time by managing all of their installments through Cash App. They can also find BNPL offers without leaving the app through integrated Afterpay.
Cross-sales are a great way to increase revenue and build your brand. They can reach new audiences, attract new customers and positively impact overall profitability.
Finally, the company is increasing its user base by targeting an underserved demographic: teenagers. Traditional banks tend to overlook this group, creating an opportunity for Block. It can lock in these customers at an early stage to help sustain its user base.
SQ Stock Will Not Stay Cheap Forever
The financial ecosystem is getting more complex, making it harder for the average person to keep up with the latest developments. That’s where Block comes in, with several services under one roof.
Valuations for most sectors, including tech, are depressed. But things look optimistic for SQ stock, with some significant growth catalysts likely to be on the horizon soon.
On the publication date, Faizan Farooque did not have (either directly or indirectly) any 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.
