Block, Inc. (SQ) | Investment Case

1. Company Snapshot

1.a. Company Description

Block, Inc., together with its subsidiaries, creates tools that enables sellers to accept card payments and provides reporting and analytics, and next-day settlement.It provides hardware products, including Magstripe reader, which enables swiped transactions of magnetic stripe cards; Contactless and chip reader that accepts Europay, MasterCard, and Visa (EMV) chip cards and Near Field Communication payments; Square Stand, which enables an iPad to be used as a payment terminal or full point of sale solution; Square Register that combines its hardware, point-of-sale software, and payments technology; Square Terminal, a payments device and receipt printer to replace traditional keypad terminals, which accepts tap, dip, and swipe payments.The company also offers various software products, including Square Point of Sale; Square Appointments; Square for Retail; Square for Restaurants; Square Online and Square Online Checkout; Square Invoices; Square Virtual Terminal; Square Team Management; Square Contracts; Square Loyalty, Marketing, and Gift Cards; and Square Dashboard.

In addition, it offers a developer platform, which includes application programming interfaces and software development kits.Further, the company provides Cash App, which enables to send, spend, and store money; and Weebly that offers customers website hosting and domain name registration solutions.It serves in the United States, Canada, Japan, Australia, Ireland, France, Spain, and the United Kingdom.

The company was formerly known as Square, Inc.and changed its name to Block, Inc.in December 2021.

Block, Inc.was incorporated in 2009 and is based in San Francisco, California.

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1.b. Last Insights on SQ

Here is a 90-word analysis of the negative drivers behind Block, Inc.'s recent stock performance: Block's Q4 earnings miss, reporting EPS of $0.71, fell short of Wall Street expectations, weighing on the stock. Despite increasing revenue and gross profit, the company's profitability and growth prospects are under scrutiny. Additionally, the company faces legal headwinds, with multiple class-action lawsuits filed against it, alleging securities law violations. The legal uncertainty and earnings disappointment have likely contributed to the negative sentiment surrounding the stock.

1.c. Company Highlights

Last Price	83.46
Change Percentage	0.57%
Open	83.89
Previous Close	82.99
Market Cap ( Millions)	51730
Volume	1142032
Year High	99.26
Year Low	55
M A 50	89.26
M A 200	73.92

FCF Yield	4.93%
Dividend Yield	0.00%
ROE	14.35%
Debt / Equity	35.99%
Net Debt / EBIDTA	-11.25%
Price To Book	1.66
Price Earnings Ratio	11.89
Price To FCF	20.27
Price To sales	1.55
EV / EBITDA	17.7

2. Block's Q3 2025 Earnings: A Strong Performance

Block reported a robust third-quarter 2025 earnings, with gross profit growing 18% year-over-year to $2.66 billion, driven primarily by Cash App's 24% growth. Adjusted operating income was $480 million, demonstrating strong profitability despite investments in long-term growth. The company's adjusted EBITDA was $833 million, and adjusted operating income margins were 18%. Earnings per share (EPS) came in at $0.87, beating estimates of $0.627. The company's financial performance was characterized by significant growth in its key business segments.

Publication Date: Nov -08

                                    📋 Highlights
                                    Gross Profit Growth::
                                                Block's Q3 gross profit rose 18% to $2.66B, primarily driven by Cash App's 24% revenue growth.
Cash App Scale::
                                                Cash App reached 58 million monthly active users, with 25% YoY growth in gross profit per transacting user.
Profitability Metrics::
                                                Adjusted operating income was $480M, and adjusted EBITDA hit $833M, with 18% operating margins despite growth investments.
Borrow Product Performance::
                                                The Cash App Borrow product saw 134% YoY origination volume growth to $22B annualized, with 24% net margins.
Q4 Guidance::
                                                Block forecasts Q4 gross profit of $2.755B (+19% YoY) and adjusted operating income of $560M, with $1.5B in stock repurchases year-to-date.

                                

Cash App's Growth Acceleration

Cash App's monthly active users reached 58 million in September, with a 25% year-over-year growth in gross profit per monthly transacting active user. The Borrow product, a key part of the Cash App ecosystem, saw origination volume grow 134% year-over-year, reaching nearly $22 billion on an annualized basis. The product has healthy unit economics, with loss rates below 3% and annualized net margins at 24%. Cash App's banking users grew to 8.3 million, with 18% year-over-year growth in primary banking actives.

Square's Performance and Guidance

Square's gross profit grew 9% year-over-year, with Gross Payment Volume (GPV) growing 12%. The company expects to deliver its strongest new volume added performance ever in 2025. For the fourth quarter of 2025, Block expects gross profit growth of over 19% year-over-year to $2.755 billion and adjusted operating income of $560 million. The guidance takes into account the dynamic environment and potential outcomes, but the company has seen strong performance in October.

Valuation and Outlook

Block's current valuation metrics indicate a 'P/E Ratio' of 12.74, 'P/B Ratio' of 1.77, and 'P/S Ratio' of 1.66. The 'EV/EBITDA' ratio is 17.43, suggesting that the company's valuation is reasonable considering its earnings growth prospects. Analysts estimate next year's revenue growth at 11.5%. The company's focus on driving growth through its ecosystem, AI tools, and software solutions positions it well for future expansion.

Strategic Focus and Future Plans

The company is focusing on three key opportunities: connecting sellers and consumers, delivering world-class AI tools, and making selling easier with software solutions. Block is leveraging AI to drive growth and reduce costs, with plans to automate mundane tasks and surface features and products to customers. The company's strategy focuses on local geographies and neighborhoods, giving them insight into how far they can push their headcount envelope and scale internationally.

3. NewsRoom

Tocvan Announces Positive Surface Results From North Block And Drill Program Update At Gran Pilar

Dec -04

Source: accessnewswire.com

Successful 2025 Nalunaq gold mine drilling programme - 1,840 g/t of gold over 0.5m in Mountain Block derisks near-term production and expansion of the Main Vein at depth

Dec -04

Source: globenewswire.com

Block's BFCM Transactions Reach 142M: Is the Growth Strengthening?

Dec -03

Source: zacks.com

Block, Inc. (XYZ) Presents at UBS Global Technology and AI Conference 2025 Transcript

Dec -02

Source: seekingalpha.com

CORRECTING and REPLACING Block Processes 124 Million Transactions as Americans Shop Local This Black Friday, Cyber Monday

Dec -02

Source: businesswire.com

H&R Block: High Yield, High Uncertainty In An AI-Driven Future

Dec -02

Source: seekingalpha.com

Block Processes 124 Million Transactions as Americans Shop Local This Black Friday, Cyber Monday

Dec -02

Source: businesswire.com

Undercovered Dozen: LyondellBasell, Block, Galaxy Digital And More

Dec -01

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (13.80%)

6. Segments

Cash App

Expected Growth: 14.4%

Cash App's growth is driven by increasing adoption of digital payments, expansion into new financial services such as investing and bitcoin trading, and growing user engagement.

Square

Expected Growth: 12.5%

Square's payment and point of sale solutions drive growth, with increasing adoption in retail and food service industries, and expanding presence in international territories.

Corporate and Other

Expected Growth: 15.6%

Block, Inc.'s Corporate and Other segment growth is driven by increasing adoption of digital payments, expanding global e-commerce, and growing demand for point-of-sale solutions.

7. Detailed Products

Square Point of Sale

A point-of-sale system that enables businesses to accept payments, track inventory, and manage orders

Square Online Store

An e-commerce platform that allows businesses to create an online store and sell products online

Square Invoices

A tool that enables businesses to create and send professional invoices to customers

Square Capital

A financing platform that provides businesses with access to capital to grow their business

Cash App

A mobile payment service that enables individuals to send and receive money

Afterpay

A buy now, pay later service that allows customers to pay for purchases in installments

8. Block, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Block, Inc. operates in the financial technology industry, which is rapidly evolving. While there are substitutes available, such as traditional banks and financial institutions, Block's innovative products and services provide a unique value proposition, making it difficult for customers to switch.

Bargaining Power Of Customers

Block, Inc.'s customers have limited bargaining power due to the company's strong brand and unique products. Customers are loyal to the brand, and switching costs are high, giving Block, Inc. an upper hand in negotiations.

Bargaining Power Of Suppliers

Block, Inc. relies on a network of suppliers for its operations, including payment processors and technology providers. While suppliers have some bargaining power, Block's scale and negotiating power mitigate this risk.

Threat Of New Entrants

The financial technology industry is highly competitive, and new entrants can easily disrupt the market. Block, Inc. must continuously innovate and improve its products and services to stay ahead of the competition.

Intensity Of Rivalry

The financial technology industry is highly competitive, with many established players and new entrants vying for market share. Block, Inc. must focus on differentiating its products and services to maintain its market position.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	24.51%
Debt Cost	3.95%
Equity Weight	75.49%
Equity Cost	16.77%
WACC	13.63%
Leverage	32.48%

11. Quality Control: Block, Inc. passed 3 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Zscaler

A-Score: 4.9/10

Value: 2.0

Growth: 8.4

Quality: 4.6

Yield: 0.0

Momentum: 9.0

Volatility: 5.3

1-Year Total Return ->

Palantir

A-Score: 4.8/10

Value: 0.0

Growth: 7.6

Quality: 8.5

Yield: 0.0

Momentum: 10.0

Volatility: 2.7

1-Year Total Return ->

Fortinet

A-Score: 4.8/10

Value: 0.8

Growth: 9.1

Quality: 8.5

Yield: 0.0

Momentum: 5.5

Volatility: 4.7

1-Year Total Return ->

Adobe

A-Score: 4.7/10

Value: 3.0

Growth: 7.7

Quality: 9.0

Yield: 0.0

Momentum: 1.5

Volatility: 7.3

1-Year Total Return ->

Cloudflare

A-Score: 4.4/10

Value: 2.0

Growth: 8.1

Quality: 2.5

Yield: 0.0

Momentum: 9.5

Volatility: 4.0

1-Year Total Return ->

Block

A-Score: 4.1/10

Value: 3.5

Growth: 8.4

Quality: 6.7

Yield: 0.0

Momentum: 3.0

Volatility: 3.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

20.33%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

13.63%

Block, Inc. - US8522341036

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on SQ

1.c. Company Highlights

Fairly Valued

Medium Volatility

Average Growth

Earnings Beats

Revenues Beats

Expensive

Stable Momentum

Average Yield

Revenues Miss

Average Quality

Higher Growth

Earnings Miss

2. Block's Q3 2025 Earnings: A Strong Performance

Cash App's Growth Acceleration

Square's Performance and Guidance

Valuation and Outlook

Strategic Focus and Future Plans

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (13.80%)

6. Segments

Cash App

Expected Growth: 14.4%

Square

Expected Growth: 12.5%

Corporate and Other

Expected Growth: 15.6%

7. Detailed Products

Square Point of Sale

Square Online Store

Square Invoices

Square Capital

Cash App

Afterpay

8. Block, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Block, Inc. passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

83.46$

Current Price

83.46$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA