Block Stock Traders Are Ignoring the Rite-Aid Collab, but Shouldn’t

  • Block (SQ) and Rite Aid (RAD) are working together to offer "buy now, pay later" solutions.
  • This collaboration demonstrates Block's ambitious vision for Afterpay.
  • Investors should grab some shares of Block while they're relatively cheap.
SQ stock - Block Stock Traders Are Ignoring the Rite-Aid Collab, but Shouldn’t

Source: Sergei Elagin / Shutterstock

Afterpay, a subsidiary company of financial technology (fintech) giant Block (NYSE:SQ), is engaged in a potentially game-changing collaboration with Rite Aid (NYSE:RAD). However, the trading community doesn’t seem to appreciate how important this event is. So, now is a great time to take a long position in SQ stock.

To different people, Block is known for different things. Some folks think of Block as the company formerly known as Square and as the company that brought the Cash App to the fintech market. Others might consider Block as a business with significant interests in the cryptocurrency and blockchain spaces.

These are all valid viewpoints. However, let’s not forget that Block also owns “buy now, pay later” (BNPL) company Afterpay. As Afterpay works closely with a retail pharmacy giant, all of the stakeholders should benefit in the long run.

Ticker Company Price
SQ Block, Inc. $63.69

What’s Happening with SQ Stock?

Perhaps it’s because cryptocurrency prices crumbled not long ago. Or maybe it’s due to the beatdown of technology-related stocks during 2022’s first half. For whatever reason, SQ stock has declined from nearly $300 almost a year ago to around $60 recently.

That’s quite a steep discount. Should Block shares trade at such a comparatively low price point, even while the company is demonstrating fiscal growth? Just because Wall Street doesn’t favor crypto and tech stocks right now doesn’t mean that investors should shun Block.

Consider that Block generated gross profit of $1.29 billion, up 34% year-over-year, during 2022’s first quarter. Drilling down to specific company segments, Cash App’s gross profit of $624 million was up 26%, while Square’s gross profit of $661 million represented a 41% increase.

Perhaps the most significant event during Block’s first quarter of the year, however, was the acquisition of Afterpay. This buyout was finalized on Jan. 31. As a result, Block staked its claim in the potentially lucrative BNPL space.

A New Generation of Consumers

One particular development should convince the skeptics that Afterpay could be a major revenue generator for Block. Reportedly, Rite Aid’s online shoppers will now have “a new way to pay for everyday items in four installments at no additional cost when you pay on time.”

Not only is Rite Aid allowing its customers to use Afterpay on purchases made online on its website, but the drugstore giant also plans to “roll out its flexible payment option in stores nationwide in the coming months.” It’s a match made in heaven, really, as today’s online shoppers have come to expect flexible payment options at the point of sale.

Indeed, the press release specifically cites the potential connection to younger shoppers, saying, “With nearly 70% […] of Afterpay’s highly-engaged network of digitally-native Gen Z and Millennial customers, Rite Aid can expect to see a new generation of consumers shopping online using BNPL.”

What You Can Do Now

Is the market failing to appreciate the growth potential of the BNPL space, or of Afterpay’s role within it? If so, then there’s a tremendous buying opportunity today with SQ stock.

Thus, enterprising investors can swoop in and grab a few shares while they’re still priced at a discount. The message to the critics is crystal-clear: Now is the time to get over your emotional block and take a chance on Block.

On the date of publication, David Moadel 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.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


Article printed from InvestorPlace Media, https://investorplace.com/2022/06/sq-stock-traders-are-ignoring-the-rite-aid-collab-but-shouldnt/.

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