Block's Growth Driven by Cash App, But Profitability and Competition Remain Concerns
-
Cash App is Block's main growth driver, contributing over 50% of revenue and profit in Q2'23 with 35-37% YoY growth. It has expanded offerings beyond a digital wallet.
-
Block still commands a growth premium valuation despite decelerating growth, with 28x P/E vs sector median of 14x. Stock is down 20% recently on conservative guidance.
-
Upside potential to $88 based on consensus growth estimates, but Block still lacks GAAP profitability. Expenses growing faster than revenue.
-
Faces intense competition, with PayPal/Venmo dominating digital wallets. Revenue growth slowed to 12% in Q3 amid macro uncertainty.
-
Cautious buy rating given upside potential, but growth expectations baked in. Investors must be patient given premium valuation and competitive threats.