Block Inc. (SQ): Strong Q1 Performance and Promising Bitcoin Strategy Signal Upbeat Future

Analyst Andrew Harte from BTIG reiterated a Buy rating on Block (SQ – Research Report) and keeping the price target at $90.00.

Andrew Harte’s rating is based on a combination of strong financial performance and positive future outlook for Block (SQ). The company’s first-quarter report for fiscal year 2024 showed a considerable outperformance in gross profit growth, surpassing both the BTIG and Street expectations. This growth, especially within the Cash App segment, was also complemented by a significant beat in adjusted operating margin, which expanded to 17% against the consensus estimate of 12%. Additionally, Block’s management has demonstrated confidence by increasing their full-year 2024 guidance, anticipating a ‘Rule of 32’ performance, which reflects their expectations for combined revenue growth and profit margin.
Furthermore, despite some investors potentially questioning CEO Jack Dorsey’s dedicated focus on Bitcoin in his shareholder letter, Harte sees significant upside potential from Block’s Bitcoin activities. He notes that the company’s investment in Bitcoin-related projects is minimal, yet it holds the promise of substantial returns. The commitment to invest 10% of gross profit from Bitcoin products into Bitcoin itself is seen as a strategic move that could yield positive results without imposing large costs on the company. Harte’s outlook is also driven by Block’s valuation, which he views as attractive at approximately 15 times FY24E EV/EBITDA, given the company’s potential to maintain mid-teens growth and margin expansion through FY25.

In another report released today, Wells Fargo also maintained a Buy rating on the stock with a $95.00 price target.

Based on the recent corporate insider activity of 102 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of SQ in relation to earlier this year.

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Block (SQ) Company Description:

Founded in 2009, California-based Square, Inc. provides credit card payment processing solutions. The company’s commerce ecosystem offers point-of-sale software and hardware that helps sellers with payment and point-of-sale solutions.