Block (XYZ) Pushes Cash App Monetization, Is It Still 12% Undervalued?
Block (XYZ) is back in focus after Third Point Management highlighted the company’s shift toward deeper Cash App monetization, with a planned 2025 milestone for nationwide loan origination through Square Financial Services.
See our latest analysis for Block.
Block’s recent 90 day share price return of 15.9% and year to date share price return of 26% suggest momentum has been building. However, the 1 year total shareholder return of 9% and 5 year total shareholder return decline of 69.94% show a mixed longer term picture around execution and risk.
If you are weighing Block’s story against other opportunities in fintech and payments, this is a good moment to see what else is moving with the 21 cryptocurrency and blockchain stocks
After Block’s recent share price rebound, the stock still trades below both analyst targets and some estimates of intrinsic value. Is that a genuine discount, or a warning that the market is pricing the risks correctly?
Most Popular Narrative: 11.9% Undervalued
Block’s most followed narrative puts fair value at $93.23, above the last close of $82.09. This frames the current debate around its upside potential.
The scaling and innovation within Square for Businesses highlighted by the launch of new hardware like Square Handheld, adoption of omnichannel commerce tools, and growing field/telesales teams positions Block to further capture share from the global trend toward digitalization and consolidation of small business commerce, supporting topline growth and eventual margin expansion as the business scales internationally.
Want to see what underpins that valuation gap for Block? The narrative leans on rising earnings power, stronger margins, and a future profit multiple that assumes consistent execution.
Result: Fair Value of $93.23 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, the Block narrative still leans on sensitive areas such as crypto related revenue swings and rising credit risk from Cash App Borrow and Afterpay loan growth.
Find out about the key risks to this Block narrative.
Another View: What Block’s P/E Ratio Is Telling You
The first story argues Block is 11.9% undervalued, yet the current P/E of 61.1x tells a different story. It is far higher than the US Diversified Financial industry at 14.9x, the peer average at 12.3x, and even the 29.2x fair ratio that the market could move toward. That gap points to meaningful valuation risk if expectations reset.
Investors weighing this against the earlier fair value case may want to see what the numbers imply about that price level before deciding which story feels more realistic. See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
With sentiment split between opportunity and risk around Block, this is a good time to move quickly, review the data for yourself, and weigh both sides using the 2 key rewards and 2 important warning signs
Looking for more ideas beyond Block?
If Block has you thinking more seriously about where your money is working hardest, do not stop here. Broader opportunities could be passing by if you only watch one stock.
- Target potential mispricing by checking companies that screen as high quality and priced below some estimates of fair value through the 53 high quality undervalued stocks.
- Strengthen your income stream by reviewing companies that appear in the 7 dividend fortresses and see which payouts might better support your long term goals.
- Reduce portfolio stress by looking at stocks highlighted in the 82 resilient stocks with low risk scores, which may help balance more volatile positions.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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