Jack’s Fintech Giant Just Quadrupled Profits

The stock market has a way of turning heroes into villains overnight, and Block is a perfect case study. Just a few years ago, it was one of the hottest names on Wall Street, riding high on the wave of digital adoption.

Fast forward to today, and the stock is trading nearly 80% below its all-time highs. For many investors, that kind of collapse leaves a scar. But for others, it leaves an opening.

Block’s fall from grace wasn’t due to a failed product or scandal. It was largely a result of lofty expectations clashing with the reality of interest rate normalization and tighter capital markets. While some might view its decline as a red flag, others might recognize it as a rare disconnect between price and potential.

Key Points

• Core businesses are thriving: Square and Cash App continue to grow, with gross profit up 4x since 2020.

• User growth has slowed, but deeper engagement is driving profit higher.

• Trading at 3.5x gross profit with rising earnings, Block offers a favorable risk-reward setup.

Growth Levers Most Investors Overlook

What makes Block intriguing now is not just that it’s beaten down, it’s that the levers for growth are still intact and under-appreciated.

In the Square segment, Block is moving upmarket, targeting larger sellers. Bigger customers mean more software adoption, more financial services uptake, and more transaction volume, all of which flow directly into gross profit.

Meanwhile, Cash App is no longer focused solely on new-user growth. The playbook has shifted toward monetization and deepening user engagement and driving more financial activity per user. That transition from “scale” to “stickiness” is critical, and it’s working.

Yes, the pace of user growth has cooled from its early days. But monetization per user is trending higher. Gross profit is expected to rise another 12% this year, despite the macro headwinds.

The Risk-Reward Has Flipped

To be clear, Block isn’t without risk. The Afterpay acquisition raised eyebrows, it was a nearly $14 billion all-stock deal at peak valuation for a BNPL business whose long-term value is still unproven. And its Bitcoin bets are polarizing, to say the least.

Still, most of these perceived risks are already priced in. At its 2021 peak, Block was trading at valuations that assumed flawless execution for years.

Today, it’s trading at just 3.5x gross profit. That’s a sharp contrast, especially considering analysts expect Block to earn $2.73 per share this year and $3.81 next year.

In other words, it’s not a “growth story with no profits” anymore, this is a profitable, growing fintech trading at a value-stock multiple.

Investors often talk about finding asymmetric opportunities, meaning limited downside with meaningful upside. That’s precisely what Block looks like today.

If management can reignite user growth or unlock more utility from existing platforms, the upside could be substantial. And even if it doesn’t happen overnight, a long-term investor buying at these levels isn’t paying a premium for hope.

A Stock to Buy For The Long-term?

Block was once the poster child of fintech exuberance. Today, it’s become a value play hiding in plain sight. It still has a vast runway, real profits, and the kind of platform optionality most companies would envy.

While it may never recapture its meme-stock glory days, that might be a good thing, for the kind of investor who prefers getting in before the crowd returns.

Sometimes the best time to buy is when the hype is gone, but the engine is still running. That’s the story of Block right now.