Block Hints At Q2 2025 Double-Beat Performance, Bitcoin Bet Appears Promising

Summary The bulls quietly price in a potential FQ2’25 double beat performance, as observed in XYZ’s robust stock price recovery, thanks to the management’s promising commentaries in the May 2025 conference. This is significantly aided by the potential passing of the long-awaited cryptocurrency bill, with Bitcoins likely to be publicly adopted as an alternative to fiat currency. This development underscores XYZ’s strategic launch of Bitcoin payments on Square from 2026 onwards, allowing them to monetize their Bitcoin horde on balance sheet. This is significantly aided by the management’s determination to drive renewed growth through increased density on its Cash App platform, allowing them to drive improved engagement and monetization. We shall discuss the caveats linked to our reiterated Buy rating for the XYZ stock. Block’s Bitcoin Bet Turning Out As Expected – Reversal In Progress We previously covered Block (NYSE: XYZ ) in April 2025, discussing how the mixed Cash App performance in FQ4’24 and the lumpy FQ1’25 guidance had triggered the stock’s selloff, worsened by the uncertain macroeconomic environment. Even so, thanks to the fintech’s expanding profit margins, the richer balance sheet, and the promising FY2025 guidance, we had believed that the bottom might already be here, especially since the management had continued investing in its growth initiatives across Square/ Cash App and merchant partners while reducing headcounts to drive profitable growth. XYZ 1Y Stock Price Trading View Since then, XYZ has had a robust recovery by +28.4% compared to the wider market at +18.7%, with a similar performance also observed in its fintech peers in varying degrees. This is despite the steep one-day meltdown by -20.4% observed in early May 2025 after the double miss observed in the FQ1’25 earnings call along with the lowered FY2025 guidance , with it naturally triggering questions into its future prospects at a time of intensifying fintech/ cryptocurrency payment competition. For reference, XYZ previously offered FY2025 gross profit guidance of at least +15% YoY, adj operating income of $2.1B (+21% YoY), and Rule of 35.5% in the FQ4’24 earnings call, before unceremoniously lowering those numbers to +12% YoY, $1.9B (+19% YoY), and 31% in the FQ1’25 earnings call, respectively. This is worsened by FQ1’25’s poorer performance at +9% YoY, +28% YoY, and 29% already paling in comparison against the lowered guidance, worsened by the notable deceleration from FY2024 growth profile at +18% YoY, $1.61B (+360% YoY), and 36.5%, respectively. As a result of, we can understand why the market has decided to sell first and ask later, with the fintech seemingly lagging its increasingly more competitive peers. On the other hand, XYZ’s recent commentaries in the J.P. Morgan 53rd Annual Technology, Media and Communications Conference has been quietly optimistic indeed, with the management already highlighting notable sequential improvements in the Cash App performance in April 2025 compared to that in Q1’25. For example, Cash App’s gross profit growth has improved to +13% YoY in April 2025 compared to that of +7% YoY reported in March 2025, with a similarly promising cadence also observed in the Cash App inflows per active at +9% YoY compared to +5% YoY, respectively, with the uptrend continuing to the early May 2025. These have demonstrated the excellent health of XYZ’s customer base and the robust demand for its fintech offerings, with it likely to trigger a sequentially improved FQ2’25 performance compared to the recently offered gross profit growth guidance at +9.5% YoY. These are well supported by the resilient US labor market with it perhaps explaining why the stock has recovered by the rich double digits since the May 2025 bottom, as the market prices in a potential FQ2’25 double beat. This is significantly aided by XYZ’s determination to drive renewed growth through increased “density,” with the idea of growing the adoption of its vertically integrated Cash App offerings across paycheck deposit, digital/ P2P payment, debit/ credit card, lending (through its in-house bank, Square Financial Services), cash flow management (including savings), and investment (including stocks and bitcoin), amongst others: And if Cash App can be a hub and also present a spending device to these folks and more and more of them are our teams, which is a big part of our focus, then not only can we grow the network, but we can also grow the density and we can build engagement ( Seeking Alpha ) XYZ has also highlighted their plans to expand their fintech/ banking ecosystem through its in-house bank, Square Financial Services , with the internalized loan servicing/ origination expected to deliver a “better unit economics on an already profitable P&L,” otherwise known as, a lower cost of funding for its loan segment. Given that the subscription and services-based segment (arising from Square loans, BNPL platform , and interest incomes) is the fintech’s top/ bottom-line growth driver, with a +12.5% YoY in revenue growth , +13.3% YoY in gross profit growth, and 85.1% in gross profit margins (+0.6 points YoY) in FQ1’25, we concur with the management’s engagement strategy indeed. Moving on, XYZ has further doubled down on its bitcoin ambitions, through the upcoming release of Proto , its first 3nm bitcoin mining chips and customized systems in H2’25 , with an estimated total market size of up to $6B and the segment expected to drive further gross profit growth. This is on top of the upcoming launch of bitcoin payments ( BTC-USD ) on Square from 2026 onwards, a timely decision given the ” regulatory progress and rising institutional demand,” with the US lawmakers seemingly closer to passing the long-awaited cryptocurrency bill. Assuming so, it appears that XYZ’s bitcoin bet has turned out as expected, with the cryptocurrency seemingly on its way to be publicly adopted as an alternative to fiat currency, perhaps explaining why BTC-USD has already hit new peaks of $122.65K by mid July 2025. The Conse nsus Forward Estimates Tikr Terminal Even so, it is apparent that XYZ will need to deliver promising results from its ongoing growth initiatives before the market may be fully convinced, as observed in the consistently lowered consensus forward estimates. This is with the fintech expected to report a decelerating top/ bottom-line growth at a CAGR of +7.3%/ +11.2% between FY2024 and FY2027, compared to the prior estimates of +11%/ +25.4% and the 5Y historical growth profile at +60.4%/ +33.3%, respectively. XYZ Valuations Seeking Alpha These reasons may also be why XYZ’s valuations appear rather expensive at FWD P/E non-GAAP valuations of 24.36x, up from the April 2025 bottom of 11.17x, the 1Y mean of 18.12x, and the sector median of 11x, albeit still somewhat reasonable when compared to its profitable fintech peers, including SoFi ( SOFI ) at 73.77x and PayPal ( PYPL ) at 14.34x. Based on the current FWD P/E non-GAAP valuations to 24.36x and the 3Y adj EPS growth estimates at a 3Y CAGR of +27.4%, from the FQ1’25 annualized adj EPS of $2.24 to the consensus FY2027 adj EPS estimates of $4.64, we are looking at a relatively cheap FWD PEG non-GAAP ratio of 0.88x. When comparing to its fintech peers, including SOFI at 0.93x and PYPL at 1.62x, it is apparent that XYZ remains rather compelling here, assuming that the latter’s growth initiatives work out as expected. So, Is XYZ Stock A Buy , Sell, or Hold? XYZ 3Y Stock Price Trading View For now, the bulls have already defended XYZ’s new floor at the $48s ranges by May 2025, up from the $42s observed in October 2023, with the stock seemingly retesting the $69s resistance levels after breaking out of the 50/ 100 day moving averages. XYZ’s Mixed Technical Indicators Trading View Based on the mixed historical trends and technical indicators above (red and blue), it remains to be seen if XYZ may be able to sustain its upward movement moving forward. Readers must note the notably higher short interest volumes by +63.2% on a YoY basis and the greedy stock market sentiments , with it implying further volatility in the near-term, depending on the fintech’s FQ2’25 earning results in August 7, 2025 and the results of the cryptocurrency bill . Based on XYZ’s FQ1’25 annualized adj EPS of $2.24 and the 1Y mean of 18.12x, it is apparent that the stock is trading at a notable premium to our base-case fair value estimates of $40.50. Even so, based on the consensus FY2027 adj EPS estimates of $4.64, there appears to be an excellent upside potential of +21.6% to our base-case long-term price target of $84. Based on the current FWD P/E non-GAAP valuations of 24.36x (nearer to its peer group mean of ~30x), it is apparent that the stock continues to offer an excellent upside potential of +63.6% to our bull-case long-term price target of $113, despite the rich double-digits recovery from the May 2025 bottom. As a result of the bullish uptrend support observed in its stock performance, the management’s promising commentaries in the recent conference, and the double-digits upside potential, we are reiterating our Buy rating for the XYZ stock. This is with the caveat that interested investors observe the stock price movement for a little longer before adding, preferably nearer to the 50/ 100 day moving averages of ~$60s ranges for an improved margin of safety and a lower dollar cost average. At the same time, while XYZ may have offered a promising commentary surrounding their April and early May 2025 performance, investors should also temper their near-term expectations, since it remains to be seen if the same cadence may be carried through the Q2’25 and Q3’25.

Source: Seeking Alpha