Over the past decade, FAANG stocks – an acronym that represents the most prominent tech companies, including Facebook (now Meta), Amazon, Apple, Netflix, and Google (now Alphabet) – have rewarded long-term investors. These stocks have grown faster than the overall S&P 500 and the technology-focused Nasdaq.
FAANG companies showcase several competitive advantages, and continued growth is anticipated over the next decade. But the Law of Large Numbers has caught up to the FAANG stocks. After all, growing a trillion dollar company by 25% is much more difficult growing a billion dollar one by that amount. That begs the question: where can you look now to offer potentially higher returns over the next decade?
Block (SQ), formally known as Square, is a fintech company building a financial ecosystem. You likely know Block as the company behind the white square readers and countertop card readers commonly used by small business owners. But there’s much more to this growing company that meets the eye. In fact, it has two major product ecosystems.
The first involves point-of-sales systems and payment processing services. The Square platform encompasses all the software, hardware, and services merchants require to successfully take payments in-person and online. This platform now offers a spectrum of sophisticated tools and solutions.
The second ecosystem is the Cash App platform. This mobile app allows consumers to deposit, spend, borrow, invest money, and even file taxes. Since Block is integrating the Afterpay Shop Directory into Cash App, this expansion will unlock synergies between the company’s two ecosystems, fueling ongoing growth.
Block has also developed several other tools, like Spiral (formerly Square Crypto) and TIDAL, a global platform for musicians and fans.
Collectively, these initiatives have led to impressive financials. In Q4 2021, Block generated $1.18 billion, up 47% year over year. Gross profit for Cash App was up 37% year over year, and the Square ecosystem grew by 54%. Block’s Q2 2022 report highlighted further growth, as both ecosystems grew 29% year over year, bringing in $1.47 billion.
Block’s current total addressable market in the United States is $190 billion. Considering the company also operates in Canada, Australia, Japan, and several European countries, it’s clear that big things lie ahead.
Shares are currently down by more than 54% year to date, presenting a rare buying opportunity. The road ahead will likely be bumpy, but Block is a solid company with massive growth opportunities.
Thanks to this strong market position, Cloudflare has seen impressive growth.
In Q2 2022, the company reported sales of $234.5 million and is in great shape to continue expanding. It also boasted significant customer growth, hitting a record addiction of 212 large customers last quarter, and operating cash flow was $38.3 million. There is plenty to be excited about here; Cloudflare assesses its market opportunity to be as much as $135 billion by 2024.
There are some risks involved with Cloudflare, and wild swings in the stock’s price are likely ahead. However, the company’s hot streak isn’t over, and for the right investor, that could translate into a big win.