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Happy Holidays!
Hello, Reader.
In the spirit of the holiday season, I’d like to share a small gift with you today: a particular fintech stock I’ve been closely watching.
This financial technology company that serves both merchants and consumers recently saw a 10% annual increase in its Black Friday and Cyber Monday performance results (your holiday shopping might’ve played a role in those numbers).
But what makes this company especially important is its role in helping redefine the fintech sector in the age of artificial intelligence.
AI is on a one-way track, rapidly improving by the minute. We can see it in how easily it integrates into our daily lives – from personalized video recommendations to generating ideas or organizing everyday tasks.
Instead of sitting back as AI inevitably touches – and changes – everything we know, including the financial sphere, I want to show you how to profit from this moment.
So, in today’s Smart Money, I’ll share one of my favorite plays in just one of many sectors being transformed by AI… and where you can find more stocks I rank as “Buys.”
Introducing Block Inc.
Volatility can open the door to new buying opportunities. That’s how I spotted Block Inc. (XYZ), which owns and operates the well-known payment app, Square.
The company’s story starts like this…
In 2009, Jim McKelvey, the founder of Mira Digital Publishing, partnered with Twitter founder Jack Dorsey. The duo developed a square-shaped card reader that could plug into smartphones, eliminating the need for expensive card readers. It was a simple, elegant solution that cost just $0.97 in hardware and was given away to merchants for free.
In 2010, Square added 50,000 test merchants in a single summer. The following year, the firm was reportedly adding 100,000 new merchants every month.
Today, the company – now known as Block Inc. – helps merchants transact over $200 billion annually. Its point-of-sale systems are found everywhere from farmers’ markets to national retail chains.
And thanks to Block’s sizeable multi-year spending on both capital investments and M&A, the company has become one of the world’s leading fintech companies. It also appears to have reached an important inflection point, and it is on a path to potentially grow beyond that.
In part, this hockey-stick-shaped growth is a reflection of the broader payment processing industry.
The business tends to be highly scalable, since digital payment systems require large upfront investments that can eventually serve an unlimited number of additional customers at virtually zero marginal cost. So, payment processors tend to become enormously profitable after they reach a certain scale.
But Block’s business model also exaggerates this growth trend, given its focus on flat fees, efficient client onboarding, and diversified software offerings. This creates more overhead, but also greater efficiencies once scale is reached.
Plus, Block owns another platform that is strengthening the company’s outlook…
Cash App’s Money-Making Service
In 2013, Block launched Cash App, a peer-to-peer payments service that skyrocketed to popularity after offering lottery-style cash awards to users. In 2023, the mobile payment service available Cash App brought in over $248 billion of gross inflows, eclipsing Square by that metric.
In addition, the company’s Cash App product has gained a major adoption rate among younger demographic groups.
It is the No. 4 app in the finance category on Apple Inc.’s (AAPL) App Store, and Gen Z and Millennials combined account for more than 70% of Cash App’s inflows. Additionally, Block is the only major fintech firm with a banking charter, and management recently announced intentions to roll out banking services for Cash App customers.
“It is about making Cash App our base’s primary financial tool,” Block CFO Amrita Ahuja said during his second-quarter earnings remarks, “which ultimately leads to stronger engagement and stronger inflows.” The Cash App card now has 57 million monthly transacting active users, making it even larger than many regional banks like TD Bank by that measure. This offering is an “option value” for future growth.
Best of all, shares of Block don’t yet reflect these truths. The company expects gross profit growth in the mid-teens through 2028, and for operating income to rise about 30% annually.
I recommend this fintech company to my Fry’s Investment Report subscribers, and I’m excited for its 2026 performance. That’s why I’m excited to share it with you today.
At Fry’s Investment Report, we’re interested in the companies with attractive valuations that effectively apply and integrate AI into their businesses – not the expensive tech stocks flying high… and too close to the sun.
But knowing what stocks to avoid is as important as knowing which to buy.
So, I encourage you to watch my Sell This, Buy That presentation, where I dive deeper into the popular stocks I think investors should sell.
To keep in the holiday cheer, I reveal the “Sell” counterpart to Block’s “Buy” – a bank that should stay far away from your portfolio.
Regards,
Eric Fry
