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Can Block's Expanding Merchant Network Push the XYZ Stock higher?
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Block (XYZ - Free Report) shares have appreciated roughly 5% in the past month and 12.7% in the past week, thanks to positive news flow, including an expanding merchant network for Cash App Afterpay, the launch of Square Handheld portable point-of-sale (POS) device, partnership with Domino’s and new Square banking tools.
However, are these developments potent enough to push the XYZ stock higher this year? On a year-to-date (YTD) basis, Block shares are down 26.5% due to increasing competitive pressure and softness in consumer spending trends, particularly in discretionary areas like travel and media. Although the company expects to see accelerated growth across both Cash App and Square, a challenging macroeconomic environment remains a concern.
Block shares have underperformed close competitors such as PayPal (PYPL - Free Report) , Affirm (AFRM - Free Report) and Shopify (SHOP - Free Report) . YTD, PayPal and Affirm shares have dropped 16.3% and 15.8%, respectively, while Shopify has inched up 0.2%. Affirm is benefiting from a strong partner base that includes Apple Pay and Shopify, while PayPal is benefiting from strong Venmo adoption.
XYZ Stock’s Performance
Image Source: Zacks Investment Research
So, what should investors do with the XYZ stock? Let’s dig deep to find out.
Can Cash App’s Growing Merchant Base Aid XYZ’s Prospects?
Last week, Cash App Afterpay announced an expansion of its merchant base with the likes of Aviator Nation, Brandon Blackwood and Double D Ranchwear, among others, to its network. These new brands expand Cash App Afterpay’s footprint across lifestyle, home, experiences, wellness and fashion categories.
In March, Block announced Cash App Afterpay in the United States, combining Cash App and Afterpay, in recognition of the development that eligible Cash App customers will begin to have access to Afterpay’s pay over time products when shopping online at partner merchant sites. Block’s Cash App is focused on driving greater commerce between consumers and merchants, while the Afterpay app helps in driving new demand through Buy Now Pay Later offerings.
Block plans to use the Cash App Card to attract new customers. The company is focusing on improving engagement with Cash App Card customers through products like Cash App Borrow and direct deposit. In a major development, Block’s Square Financial Services received approval from the FDIC to offer consumer loans nationwide through Cash App Borrow in March. This allows Block to offer more loans through Borrow as it expands to more states. This, along with in-house origination and servicing of loans, is expected to boost gross profit.
Block now expects gross profit of $9.96 billion for 2025, indicating growth of 12%. The company expects gross profit growth of 9.5% year over year in the second quarter. Block continues to expect gross profit growth to accelerate in the back half of the year, into the low-double-digits in the third quarter, and end the year with mid-teens gross profit growth in the fourth quarter. For Square, Block expects high-single-digit gross payment volume growth in the second quarter of 2025.
Block’s Top Line to Ride on Expanding Portfolio
Block’s strong positioning in the digital payments industry on the back of its robust payment and POS solutions is a notable driver. As a part of Square Releases, on May 13, Square launched Square Handheld, its most powerful portable POS device ever, featuring a large 6.2" Corning Gorilla Glass touchscreen and a battery built to power through a whole day.
Moreover, new Square Banking tools allow business owners to sign up for a Square payments account and a free Square Checking account almost instantly through one streamlined application, either on Square’s website or the POS app. Among other facilities that the new tools offer, small business sellers can now easily deposit cash at more than 70,000 retail locations at Kroger, Walgreens, Dollar General and more.
Block is investing aggressively in strengthening field sales and expanding its partner base, aiming to scale its distribution network. Marketing spend jumped 33% in the first quarter, and Block continues to see strong returns. Partnership with Domino’s is noteworthy in this regard as it is Cash App’s first-ever nationwide pizza restaurant partnership.
The Zacks Consensus Estimate for 2025 earnings is pegged at $2.72 per share, down 30.4% over the past 30 days. The figure suggests a 19.29% decline over the 2024 reported figure.
The consensus estimate for first-quarter 2025 earnings is pegged at 61 cents per share, down 36.5% over the past 30 days. The figure indicates a 34.41% year-over-year decline.
XYZ Shares Trade at a Premium
Block shares are overvalued, as suggested by the Value Score of D.
In terms of forward 12-month Price/Earnings (P/E), Block is trading at 19.92X compared with PayPal’s 13.45X.
P/E Ratio (F12M)
Image Source: Zacks Investment Research
XYZ shares are trading below the 200-day moving average, indicating a bearish trend.
XYZ Trades Below 200-day SMA
Image Source: Zacks Investment Research
Conclusion
Although Block’s expanding portfolio and growing Cash App offerings are noteworthy, challenging macroeconomic conditions, intensifying competition and stretched valuation make the stock a risky bet for investors.
XYZ currently has a Zacks Rank #4 (Sell), which means investors should stay away from the stock for the time being.
Image: Shutterstock
Can Block's Expanding Merchant Network Push the XYZ Stock higher?
Block (XYZ - Free Report) shares have appreciated roughly 5% in the past month and 12.7% in the past week, thanks to positive news flow, including an expanding merchant network for Cash App Afterpay, the launch of Square Handheld portable point-of-sale (POS) device, partnership with Domino’s and new Square banking tools.
However, are these developments potent enough to push the XYZ stock higher this year? On a year-to-date (YTD) basis, Block shares are down 26.5% due to increasing competitive pressure and softness in consumer spending trends, particularly in discretionary areas like travel and media. Although the company expects to see accelerated growth across both Cash App and Square, a challenging macroeconomic environment remains a concern.
Block shares have underperformed close competitors such as PayPal (PYPL - Free Report) , Affirm (AFRM - Free Report) and Shopify (SHOP - Free Report) . YTD, PayPal and Affirm shares have dropped 16.3% and 15.8%, respectively, while Shopify has inched up 0.2%. Affirm is benefiting from a strong partner base that includes Apple Pay and Shopify, while PayPal is benefiting from strong Venmo adoption.
XYZ Stock’s Performance
Image Source: Zacks Investment Research
So, what should investors do with the XYZ stock? Let’s dig deep to find out.
Can Cash App’s Growing Merchant Base Aid XYZ’s Prospects?
Last week, Cash App Afterpay announced an expansion of its merchant base with the likes of Aviator Nation, Brandon Blackwood and Double D Ranchwear, among others, to its network. These new brands expand Cash App Afterpay’s footprint across lifestyle, home, experiences, wellness and fashion categories.
In March, Block announced Cash App Afterpay in the United States, combining Cash App and Afterpay, in recognition of the development that eligible Cash App customers will begin to have access to Afterpay’s pay over time products when shopping online at partner merchant sites. Block’s Cash App is focused on driving greater commerce between consumers and merchants, while the Afterpay app helps in driving new demand through Buy Now Pay Later offerings.
Block plans to use the Cash App Card to attract new customers. The company is focusing on improving engagement with Cash App Card customers through products like Cash App Borrow and direct deposit. In a major development, Block’s Square Financial Services received approval from the FDIC to offer consumer loans nationwide through Cash App Borrow in March. This allows Block to offer more loans through Borrow as it expands to more states. This, along with in-house origination and servicing of loans, is expected to boost gross profit.
Block now expects gross profit of $9.96 billion for 2025, indicating growth of 12%. The company expects gross profit growth of 9.5% year over year in the second quarter. Block continues to expect gross profit growth to accelerate in the back half of the year, into the low-double-digits in the third quarter, and end the year with mid-teens gross profit growth in the fourth quarter. For Square, Block expects high-single-digit gross payment volume growth in the second quarter of 2025.
Block’s Top Line to Ride on Expanding Portfolio
Block’s strong positioning in the digital payments industry on the back of its robust payment and POS solutions is a notable driver. As a part of Square Releases, on May 13, Square launched Square Handheld, its most powerful portable POS device ever, featuring a large 6.2" Corning Gorilla Glass touchscreen and a battery built to power through a whole day.
Moreover, new Square Banking tools allow business owners to sign up for a Square payments account and a free Square Checking account almost instantly through one streamlined application, either on Square’s website or the POS app. Among other facilities that the new tools offer, small business sellers can now easily deposit cash at more than 70,000 retail locations at Kroger, Walgreens, Dollar General and more.
Block is investing aggressively in strengthening field sales and expanding its partner base, aiming to scale its distribution network. Marketing spend jumped 33% in the first quarter, and Block continues to see strong returns. Partnership with Domino’s is noteworthy in this regard as it is Cash App’s first-ever nationwide pizza restaurant partnership.
XYZ’s Earnings Estimates Revision Trends Southward
The Zacks Consensus Estimate for 2025 earnings is pegged at $2.72 per share, down 30.4% over the past 30 days. The figure suggests a 19.29% decline over the 2024 reported figure.
Block, Inc. Price and Consensus
Block, Inc. price-consensus-chart | Block, Inc. Quote
The consensus estimate for first-quarter 2025 earnings is pegged at 61 cents per share, down 36.5% over the past 30 days. The figure indicates a 34.41% year-over-year decline.
XYZ Shares Trade at a Premium
Block shares are overvalued, as suggested by the Value Score of D.
In terms of forward 12-month Price/Earnings (P/E), Block is trading at 19.92X compared with PayPal’s 13.45X.
P/E Ratio (F12M)
Image Source: Zacks Investment Research
XYZ shares are trading below the 200-day moving average, indicating a bearish trend.
XYZ Trades Below 200-day SMA
Image Source: Zacks Investment Research
Conclusion
Although Block’s expanding portfolio and growing Cash App offerings are noteworthy, challenging macroeconomic conditions, intensifying competition and stretched valuation make the stock a risky bet for investors.
XYZ currently has a Zacks Rank #4 (Sell), which means investors should stay away from the stock for the time being.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.