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Is Block Stock a once-in-a-lifetime buying opportunity? Yes, but only if you are bullish on this leading cryptocurrency
With Square for merchants and Cash App for individuals, To block (NYSE: SQ) operates two thriving ecosystems. These two segments are leaders in their respective markets, a position that has led this business to reach a market capitalization of $45 billion.
Since its initial public offering in 2015, this top fintech stocks doubled the profit of Nasdaq composite index. However, it is currently 74% below the peak price set in August 2021 (as of May 17).
Some investors may think this makes Block a an unrepeatable purchasing opportunity. I think this outlook has merit, but only if you are also bullish on one of the major cryptocurrencies.
Bullish on Bitcoin
In 2021, Block co-founder and CEO Jack Dorsey publicly declared his support Bitcoin (CRYPTO: BTC), saying he would work exclusively on this cryptocurrency if he didn’t work at the payments company or Twitter (now called X). This probably came as a shock to many.
More recently, there appears to be a renewed focus on Bitcoin. In the company’s Q1 2024 shareholder letter, Dorsey began by explaining what Block’s Bitcoin strategy is. It’s all about his firm belief that a world becoming more digital will require an internet-native decentralized currency.
The company plans to design, build and sell cryptocurrency mining equipment. With Spiral and TBD, two divisions of Bitcoin, the goal is to make cryptocurrencies more useful in people’s daily lives and to disrupt cross-border payments, respectively.
Block will also continue to periodically invest in Bitcoin for its balance sheet.
Financial implications
Cash App began allowing users to trade Bitcoin in 2018. But to be clear, the company generated only $80 million of its $2.1 billion gross profit in the first quarter of 2024 by facilitating the purchase and sale of Bitcoin. Block still makes the vast majority of its money from the hardware, software and financial services it offers merchants through Square, as well as the features Cash App offers customers.
But it’s important to try to understand what the financial implications might be. In 10 years, Block could essentially be leveraged for Bitcoin’s price action, particularly as it collects revenue from a potentially broad range of Bitcoin-related assets.
What if Bitcoin doesn’t catch on as Jack Dorsey hopes? First of all, we won’t know the answer to this question for quite some time, as many believe that we are still very early in the development of Bitcoin. However, I think Block’s core operations would still be on solid footing.
The story continues
It’s like watching Mark Zuckerberg, founder and CEO of Meta platforms, invest so heavily behind metaverse ambitions with Reality Labs. No one has any idea if and when this will bear fruit. But major social media apps are still an incredibly successful segment on their own.
No block without Bitcoin
Investors who viewed Block as a smart way to capitalize on software and digital payments trends need to think long and hard about whether they are bullish on Bitcoin as well. This requires another step in the research process.
I can see how this is a huge wake-up call for some investors who want Dorsey and his team to remain focused on the core goal of meeting the financial needs of their merchants and customers with great products and services. These critics argue that Bitcoin should be excluded from this strategy.
But on the other hand, there are clear reasons why Dorsey is positioning Block this way. Bitcoin can help Block fulfill its mission of increasing financial freedom and economic empowerment. It makes sense that the fintech firm is working on how to make the world’s most important digital asset gain greater adoption.
I am bullish on Bitcoin. And I’m also optimistic about Block’s long-term trajectory. So perhaps this really is a once-in-a-lifetime investment to buy and hold for the next decade.
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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Neil Patel and its clients have no position in any of the securities mentioned. The Motley Fool has positions and recommends Bitcoin, Block and Meta Platform. The Motley Fool has a disclosure policy.
Is Block Stock a once-in-a-lifetime buying opportunity? Yes, but only if you are bullish on this leading cryptocurrency was originally published by The Motley Fool