Block (SQ) the company formerly known as Square, had a good 2021. For example, Block’s quarterly revenues grew from $3.159 billion on 31 December 2020 to $4.079 billion on 31 December 2021.
Similarly, Block’s quarterly gross profit grew from $785 million to $1.115 billion in the same period. However, Block’s quarterly operating income fell from $45.18 million on 31 December 2020 to -$54.81 million on 31 December 2021.
Square (NYSE: SQ) changed its name to Block Inc. (NYSE: SQ) on 1 December 2021. I cannot understand this move, but Block CEO Jack Dorsey thinks it is an excellent idea. Why changing a well-known name customers are familiar with is beyond me.
I think the name Block is terrible. It sounds like a gaming company for kids. However, Block sounds better than Meta (FB), Facebook’s new name, which sounds like an erectile dysfunction treatment.
Notably, Square’s business, providing payment solutions for business, remains the same. Thus, the only new thing at Block is the name.
Is Square Growing?
There is growth at Square. Stockrow estimates Square’s revenues grew by 29.12% in the quarter ending on 31 December 2021.
In contrast, Square’s revenues grew by 140.52% in the quarter ending on 31 December 2020. Thus, Square is growing, but the growth is slowing.
Square’s growth is impressive. For example, Square’s gross payment volume grew from $31.73 billion in the third quarter of 2020 to $45.43 billion in the third quarter of 2021, Statista estimates.
Block is building a massive payments platform. For example, Business of Apps estimates Block’s popular Cash App had 36 million monthly active users in January 2022. Additionally, people have downloaded the Cash App over 100 million times. Plus, another seven million users have the Cash App debit card.
The Cash App is driving Block’s growth. I think Block (SQ) could become a major player in financial services because of the Cash App’s success.
How Much Cash is Block generating?
People buy finance stocks such as Block (NYSE: SQ) because they generate enormous amounts of cash. Hence, we need to ask how much cash is Block generating?
Block reported a quarterly ending cash flow of $2.373 billion and a quarterly operating cash flow of $175.05 million on 31 December 2021. That tax flow is growing. The quarterly operating cash flow grew from $120.73 million on 31 December 2020. In contrast, the quarterly ending cash flow fell from $2.633 billion on 31 December 2020.
Block is borrowing money to finance its activities. For instance, Block reported a quarterly financing cash flow of $653.29 million on 31 December 2021. The quarterly financing cash flow fell from $1.93 billion on 30 June 2021 and $983.77 million on 31 December 2020.
Block’s total grew from $3.03 billion on 31 December 2020 to $5.018 billion on 31 December 2021. Hence, Block finished 2021 with almost two billion in additional debt.
What Value Does Block have?
Block’s value grew in 2021. For example, Block’s cash and short-term investments grew from $3.883 billion on 31 December 2020 to $5.332 billion on 31 December 2021.
Similarly, Block’s Total Assets grew from $9.87 billion on 31 December 2020 to $13.926 billion on 31 December 2021. Thus, Block (SQ) finished with 2021 with more cash and value.
In contrast, Block’s stock price fell from $216.44 on 5 March 2021 to $97.51 on 7 March 2022. Hence, Block’s shares lost almost $120 in value in a little over year.
Thus, many value investors will examine Block. To explain, Block is a growing financial services company with a falling stock price. In addition, Block is accumulating more cash.
In the final analysis, I think Block is a stock to watch because of its falling price and growing platform. However, I will advise investors to watch Block but wait until it falls below $75 to consider buying.
Originally published at https://marketmadhouse.com on March 7, 2022
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