Potential Upside

• Sector: Financials
• Industry: Transacted & Payment Processing Services
• Quant Sector Ranking (as of 12/23/2024): 75 out of 686
• Quant Industry Ranking (as of 12/23/2024): 8 out of 43
• Market Capitalization: $54.11B
• Quant Rating: Strong Buy

"Block, Inc., formerly known as Square, Inc., is a top quant-ranked Transaction & Payment Processing Services stock founded in 2009 by Jack Dorsey and Jim McKelvey. The company has evolved from its initial focus on payments to become a diversified fintech. Block’s flagship products include Square, a payment and operations platform for merchants, and the Cash App, a digital wallet and financial platform that allows users to send, receive, and manage money. Block is known for its innovative approach to financial services; the company has made significant investments in Bitcoin and reports the coin on its balance sheet. Recent growth initiatives for SQ include partnerships with T-Mobile and SalonCentric, as well as investments in go-to-market efforts for both Square and Cash App. These efforts have contributed to strong growth and profitability for the company in Q3.

"We delivered strong results across the company during the third quarter. Gross profit was $2.25 billion, up 19% year-over-year, with 16% growth for Square and 21% for Cash App. We delivered a significant increase in profitability on a year-over-year basis with meaningful margin improvement, and our highest quarterly profitability ever for both adjusted operating income and adjusted EBITDA on a dollar and margin basis," said Amrita Ahuja, CEO and CFO of Block, Inc.

Other favorable growth metrics include a FWD EBITDA growth of 55.31% and an EPS FWD long-term growth (3-5YR CAGR) of 39%, a 280% increase over the broader financials sector. SQ’s improving profitability is evidenced by its exceptional cash from operations of $896M and a cash per share of $13.5, exceeding the sector median by 538% and 82%, respectively. SQ’s price momentum has accelerated over the last six months, delivering 43% in price return on a trailing six-month basis and an exceptional 33% on a trailing 3-month basis.

SQ Momentum Grade

While gains have diminished valuation profile, it is still trading at a 52% discount relative to the sector in terms of its FWD PEG. Oppenheimer has endorsed Block for its improving product monetization, low market penetration, and recent investments in products and sales. Additionally, the company is on track to achieve its "Rule of 40" target earlier than expected, while its Bitcoin mining strategy could further boost gross profit. Given the stock’s exceptional growth, improving profitability, and substantial price momentum, SQ is a solid choice for investors betting on shifting tech-driven consumer trends."

Cite:

https://seekingalpha.com/article/4746110-top-stocks-for-tech-driven-consumer-trends?mailingid=38002232&messageid=must_reads&piano=mra1&serial=38002232.1859662&source=email_must_reads&utm_campaign=Must+Reads+recurring+2024-12-27&utm_content=seeking_alpha&utm_medium=email&utm_source=seeking_alpha&utm_term=must_reads