Block, Inc. Rebounds: Undervalued Fintech Giant Poised for a Comeback

Block, Inc. – formerly known as Square – was once the prime example of tech euphoria on the stock market. The fintech company, founded by Twitter co-founder Jack Dorsey, is known for its mobile payment solutions and peer-to-peer apps such as Square and Cash App.

After a meteoric rise during the coronavirus pandemic, a steep decline followed – a loss of over 80% from its all-time high. But with currently around 12 times earnings and solid profitability, the company Block now appears undervalued. A closer analysis shows that Block could be on the verge of a reboot.

Core Strength No. 1: Two strong platforms – Square (Block) and Cash App

Block has a broad portfolio. Its business is primarily divided into two pillars: Square (payment solutions for businesses) and Cash App (payment and financial services for consumers). Square serves a diverse range of customers—restaurants, retailers, and service providers—and no single customer accounts for more than 5% of its payment volume.

Cash App, on the other hand, is particularly popular in the US: 57 million monthly active users, ranking first among Android financial apps and second among iOS. While user growth is flattening – only +1.8% in 2024 – payment volumes continue to rise strongly (+25% CAGR since 2020).

More than just Bitcoin hype: A clever crypto strategy

CEO Jack Dorsey is a self-proclaimed Bitcoin enthusiast – and this is reflected in Block’s crypto activities. Users can easily buy, sell, and send Bitcoin via Cash App. The company itself holds 8,485 BTC worth approximately $710 million.

But unlike MicroStrategy, Block doesn’t make the mistake of becoming completely dependent on Bitcoin: While BTC transactions generate the largest share of revenue, they only contribute around 3% to gross profit. The focus is clearly on traditional subscription and transaction services – solid, predictable, and high-growth.

Strong results, weak valuation: The market exaggerates

2024 was a record year: operating profit of over $1 billion, EPS of $4.70. Nevertheless, the stock is trading near its 52-week low. This is due to a cautious outlook for Q1 2025 and the company’s failure to meet analyst expectations.

The numbers speak for themselves: While the gross margin on Bitcoin is only 2.8%, the subscription and services business, at $6 billion, accounts for around 68% of gross profit. The stock is currently valued at 12 times earnings—a rare low in a market where many tech stocks trade at 20 to 30 times.

Risks remain – but the risk-reward ratio is convincing

Of course, there are challenges: A potential economic downturn, weaker user growth for Cash App, or stricter regulations could slow things down. The “buy now, pay later” model (Afterpay) also carries certain risks of failure.

But Block is significantly more financially stable today than it was during the pandemic boom. With $8.1 billion in cash and a clear focus on efficiency—for example, by reducing its workforce by 8%—the company is showing discipline and a strong focus on the future.

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