Digital Payments And Blockchain Will Ignite Global Commerce

Key Takeaways

• Rapid AI adoption and fintech integrations are driving sustained product innovation, user engagement, and market share gains, supporting higher earnings growth and structural profitability.
  
• Expansion into emerging payments, blockchain, and upmarket/international segments positions Block as a central player in digital finance, improving margins and unlocking significant long-term upside.
  
• Aggressive growth in lending and new products, platform dependence, and rising competition create risks of elevated costs, regulatory pressures, and long-term margin volatility.

Catalysts

Block, Inc., together with its subsidiaries, builds ecosystems focused on commerce and financial products and services in the United States and internationally.

• While analyst consensus believes AI-driven product velocity and automation will boost revenue and gross profit, these effects may be understated as Block's rapid AI adoption allows for compounding innovation across both Square and Cash App, enabling the company to deliver industry-leading features at a speed rivals cannot match and potentially unlocking structurally higher earnings growth and market share acceleration.
  
• Analysts broadly agree Cash App Borrow's nationwide rollout and Afterpay integration will expand the addressable market and margins, but this view overlooks the deepening engagement and monetization shown in new metrics such as 8 million banking actives generating triple the ARPU of average users, which, given the high attach rates among teens and graduates, suggests a step-change in per-user profitability and long-term net margin improvement.
  
• Block's unparalleled ability to leverage emerging digital payment methods-including seamless support for Bitcoin and stablecoins on both Square and Cash App-positions it to be the default payments infrastructure as global commerce shifts further from cash to digital, driving global TPV and revenue growth ahead of industry averages.
  
• The high-velocity expansion of Square's international and upmarket strategies, combined with best-in-class hardware and AI-enabled go-to-market execution, creates a strong virtuous cycle of market share gains and operational leverage that is likely to improve long-term operating margins and scale net income as penetration in underbanked and non-U.S. segments accelerates.
  
• The integration of DeFi and blockchain infrastructure (with initiatives like Proto and support for open banking), coupled with Block's established regulatory partnerships, will create new high-margin business lines and position the company as a central player in the next generation of financial services, providing upside to revenue and profit far beyond current expectations.

Block Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Block compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Block's revenue will grow by 13.0% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 12.4% today to 9.8% in 3 years time.
• The bullish analysts expect earnings to reach $3.4 billion (and earnings per share of $5.5) by about September 2028, up from $3.0 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 22.4x on those 2028 earnings, up from 15.6x today. This future PE is greater than the current PE for the US Diversified Financial industry at 16.5x.
• Analysts expect the number of shares outstanding to decline by 1.65% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.71%, as per the Simply Wall St company report.

Block Future Earnings Per Share Growth

Risks

• Block's continued aggressive expansion in lending and "Borrow" products exposes the company to elevated credit risk, with management projecting step-ups in risk losses as the business grows, which could negatively impact net margins and potentially lead to volatile earnings in the event of economic downturns or higher-than-expected defaults.
  
• Heavy platform reliance on Cash App and Square makes Block increasingly vulnerable to competition, fintech disruption, and product saturation, which may slow user and transaction growth and curb revenue expansion over the long term.
  
• Ongoing investments in international growth, hardware, and new product verticals, such as Bitcoin payments and mining, involve significant up-front costs with uncertain returns and typically yield low profitability in early stages, creating long-term pressure on net income and margin growth.
  
• The company's strategy of accelerating product launches and ramping up go-to-market investments increases operational complexity and exposes Block to higher regulatory scrutiny, data privacy concerns, and compliance requirements in the fintech and payments industry, all of which could drive up expenses and limit revenue from new product streams.
  
• Intensifying competition from both established financial institutions and nimble fintech startups-combined with advances in alternative payment infrastructure such as real-time payments and open banking-could result in pricing pressure, compressed take rates, and potential disintermediation, reducing Block's future revenue and overall profitability.

Valuation

• The assumed bullish price target for Block is $104.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Block's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $104.0, and the most bearish reporting a price target of just $35.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $34.4 billion, earnings will come to $3.4 billion, and it would be trading on a PE ratio of 22.4x, assuming you use a discount rate of 7.7%.
• Given the current share price of $75.51, the bullish analyst price target of $104.0 is 27.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.