Block.
A company you didn't know about. One of the leaders in the POS space.
Bring! You enter a local art shop. Peering at the differnet abstract art pieces, with squares, you come upon a card reader on the counter. The letters on it read Square. But is this company really a good investment? Let check it out!
Stock Information
This company is much more complex than it seems, as it owns:
1.Square - a payment platform that enables businesses to make use of their smartphones or tablets as a POS (Point-of-sale) systems, or to make payments using credit cards. It also has additional benefits: e-Commerce, banking and business loans. As of 2023, it had over 4 million sellers on its platform.
2.Cash App - an easy to use digital wallet, that enables people to send and receive money easiliy, buy and sell bitcoin or stocks, as well as tax filing. Basically a Super App for all things cash. Cash App currently has over 57 million active users on its platform as of 2024.
3.Afterpay - a service, which enables a person to pay for a product in 4 payments. As of 2023, Afterpay serves 24 million users and 348,000 merchants.
4.Bitkey - a Bitcoin hardware wallet, which enables buyers of Bitcoin to not be dependent on third-party providers. Users of this service get a hardware wallet, app, and a set of recovery tools for when all or one of the elemnts gets lost (app or hardware). The wallet cannot use the user’s Bitcoin without them.
5.Tidal - probably the most surprising element on this list, as you wouldn’t expect a music streaming app, with over 5 million subscribers, to be owned by a cash management platform business, right? Tidal has over 100 million songs, but is struggling financially, compared to Spotify.
Apart from this, Block is also actively engaging in the development of a chip that will enable people to mine bitcoin, as it’s goal is to make a “full bitcoin mining system", which, I must say, sounds interesting to me!
We have here a company, that has many users of their products across the financial industry. But now let’s take a look at their financial efficiency metrics, to see, how good is their management at allocating their capital.
I must say that I’m really disappointed in this.
Alright, now let’s move on to the profit margins, as the higher they are, the better.
This is yet another feature I’m working on - a breakdown of all their revenues exactly, so you see what the company earns - visually!
Market share:
4.10 % (As reported by CSIMarket)
Stock Financial Health
Buying a stock without first looking at its financials, is like eating bread without looking at it’s expirating date. Pff! Bread these days! Back in my day…
Probably a Tony Stark quote
My visual analysis of Block’s financial health (you won’t find it anywhere else):
We can see a positive net equity, which is a really important aspect in every company, so that’s a tick, however, we can see that their net cash is at a minus $27B, showing the huge aount of debt that they currently have (Debt to EBITDA ratio is at a mind-boggling 5.47!) ←5 years of payments until debt fully cleared.😮 (I don’t like this)
If you have any ideas on how to show complicated stock metrics easily, let me know, and I’ll try to create it! :]
Revenue growth
Is Square’s business a good one? A great representation of that can be a chart, showing their revenue’s growth quarter over quarter, as well as their net income (because, let’s be honest, that’s what the business really has to spend, at the end of the day):
Not the worst (They have better revenue growth than my t-shirt business, ie: 0), but certainly room for improvement, as 6% doesn’t satisfy me.
Net income is a different story, with the unpredictability clearly built in.
Revenue growth: OK 😐 (Room for improvement, but heading in the right direction)
Dividends and buybacks
We investors like the stability dividends offer, but Block doesn’t give that privelage to its investors, instead, it’s actively diluting their shareholders through share issuance:
That’s what usually happens in high growth companies, Uber also had it, now they have buybacks. What comes aftre buybacks, if you’re not Autozone? Dividends! :)
Valuation
Conclusion
While Block’s business model is one of the most interseting ones, along with their huge network of people, I wouldn’t be interested in buying them just yet, as I wouldn’t feel like they’re a bargain. I would wait for their service moat to grow. If stripe goes public, I think I would go there instead. But other than that, it’s an interesting company to look at.
That would be all for today, thanks for reading this, and see you in the next one!
(Pssst! For everyone interested, my t-shirt website is finally online! ➡️ sketchthread.com, I designed it myself, as I’m a programmer!😎 It took a while to make…)
This isn’t financial advice.