Financial services and digital payments platform Block Inc, formerly known as Square, has 60% upside, dwarfing the 31% return potential of PayPal, according to Bloomberg data compiled from Wall Street analysts in a report Thursday (May 5).
Block shares are trading at 76 times the company’s estimated earnings, the report says, with the company set to report its first-quarter earnings later today. Analysts and investors will need to hear more about Block’s plans for its consumer payments service, Cash App and the impact of its $29 billion acquisition of Afterpay, the report said.
Most analysts see Cash App “looking stretched” beyond the first quarter of the year and Block’s profit drag from the Afterpay addition isn’t fully reflected in its expectations, per the report. Analyst Trevor Williams told Bloomberg he’s bullish on the long-term opportunity for Block.
Block, which is led by former Twitter CEO Jack Dorsey, has expanded from a point-of-sale company into digital payment and cryptocurrencies with Cash App, and into buy now, pay later (BNPL) after closing the Afterpay acquisition.
Block has become “a full business management and FinTech service company,” said Tigress Financial Partners LLC analyst Ivan Feinseth in the Bloomberg report. “They’re going beyond the payment.” PayPal, meanwhile, is mostly reliant on eCommerce transaction, the report said.
In April, a former Block employee was accused of downloading Cash App reports containing sensitive data belonging to customers. The data affected by the breach include full names of consumers, brokerage account numbers, holdings, portfolio values and stock trading activity for the day.
Block conducted a review of the leaked reports and said it’s contacting the 8.2 million current and former Cash App users to inform them about the breach. The victims will be advised about the information that was exposed and what they can do to lower the risk of fraud and unauthorized access to their accounts.