Could Block (NYSE:SQ) stock be a hidden pick that the market largely ignored in 2023? It’s definitely possible as some of Block’s key results, along with the company’s forward guidance, indicate notable growth.
Block owns the Cash App, which is mainly geared toward consumers, and the Square platform, which is more merchant-facing. Block also has a cryptocurrency connection, so you probably don’t want to invest in the company if you’re not crypto-bullish.
Overall, Block is a bold business under CEO Jack Dorsey’s guidance, and not everyone will see a strong future for the company. However, risk-tolerant traders can certainly conduct their due diligence on Block and consider a share position while the price is down.
What’s Happening With SQ Stock?
InvestorPlace contributor Will Ashworth called SQ stock a “hot mess” and observed the “yo-yo effect with its share price.” To that, I’ll add that Block shares currently trade far below their 2021 peak price of around $275.
The market has punished Block severely — maybe too severely. Granted, interest rates are higher now than they were in 2021. Consequently, the market isn’t as tolerant of unprofitable businesses.
Is Block unprofitable, though. It depends on how you define the term. Notably, Block’s net earnings loss widened from $18.74 million in 2022’s third quarter to $33.76 million the third quarter of 2023.
On the other hand, after including “share-based compensation expense” and other factors, Block posted adjusted diluted net income of $346.149 million in Q3 2023, versus $264.44 million in the year-earlier quarter. Also, Block reported adjusted diluted net EPS of 55 cents, up from 42 cents in Q3 2022 and above the 47 cents that Wall Street had anticipated.
Block Announces Big-Time Buybacks
There were other quarterly highlights. For example, Block grew its revenue 24% year-over-year to $5.62 billion in the third quarter of 2023, beating the analysts’ consensus call for $5.44 billion.
In addition, Block firmed up its balance sheet with cash and cash equivalents of $5.112 billion at the end of Q3 2022. That’s an improvement over the $4.544 billion reported in the year-earlier quarter. So, maybe some investors can overlook Block’s aforementioned widening net earnings loss.
Moreover, Block made an announcement that should make the shareholders happy. Specifically, Block stated that it’s “instituting an initial authorization to repurchase $1 billion” worth of the company’s stock shares. This will “offset a portion of dilution from share based compensation,” according to Block. It will also allow Block’s management to “act opportunistically when we believe our company is undervalued.”
SQ Stock: A Risky but Interesting Fintech Pick
Block’s market capitalization and share price may have grown too quickly in 2021. Yet, the subsequent drawdown in 2022 and 2023 looks overdone.
Reluctant investors should take note of Block’s share repurchase plan and revenue growth. With those factors in mind, it’s entirely possible that SQ stock will revisit $100 in 2024. So, feel free to take a small share position in Block if you’re prepared for potential volatility along the way.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
