square-parent To block (SQ) presented during an investor day its strategy for integrating new technologies and services into its core businesses. Whether the new outlook will give SQ stock a lift remains to be seen.
At Investor Day on Wednesday, Chief Executive Jack Dorsey said the company has an “ecosystem of ecosystems” business model. The strategy will create a positive feedback loop between business units as the company grows, he said.
But Square didn’t provide any multi-year guidance on revenue or profit margins.
“Following its first investor day in five years, Block’s stock reaction remained relatively subdued as many investors anticipated more color on Block’s medium-term growth outlook and potential Afterpay synergies, which n ‘have not been quantified,’ UBS analyst Rayna Kumar said in a note to clients. .
Block said it plans to integrate Afterpay, a recently acquired consumer lending startup. It will also integrate Bitcoin products into its former consumer Cash app and merchant operations.
“SQ has presented a compelling vision of how the various components of its ecosystem will become increasingly connected and synergistic over time,” Bank of America analyst Jason Kupferberg said in a report.
Amid a rebranding and acquisition of Afterpay, SQ stock fell 49% in 2022. The drop in Bitcoin price put pressure on Square stock.
SQ stock: addressable market
“Block’s evolution has resulted in a multi-ecosystem strategy, which gains prowess as the connections between each generate new vectors for growth,” RBC Capital analyst Daniel Perlin said in his note. to customers.
“While generally operating as separate businesses (Square and Cash App), we believe Afterpay will bridge the gap between Square and Cash App while also investing in new emerging ecosystems, such as Tidal and Bitcoin. The combination of its core ecosystems represents a $190 billion addressable market opportunity.”
On December 1, Square changed its name to Block, while retaining the Square brand for merchants who use its point-of-sale technology and services.
Additionally, Square on January 31 completed the acquisition of Australian consumer lending startup Afterpay.
At the Investor Day, “Square delivered a message that was confident, thoughtful and consistent with strategic direction,” Susquehanna analyst James Friedman said in a statement. “SQ is focused on integrating its Cash App and Square ecosystems (largely through Afterpay), adding services and cross-selling to Cash App customers, and growing its other adjacent business lines.”
Block develops cryptocurrency products that enable bitcoin-based commerce on its merchant platform. Additionally, Cash App users can purchase Bitcoin. Bitcoin trading accounted for around 5% of Square’s gross profit in 2021.
Square Stock: Cash app users reach 46 million
On Investor Day, Block said the Cash app now has 46 million monthly active users. This is an increase from 44 million at the end of 2021. Cash App users grew by 22% in 2021.
The company revealed that its trading business adjusted profit margins by 34% last year. Cash App had adjusted profit margins of 12%, the company said.
“We found the additional fixed/variable spend disclosure in Cash App and Square to be the most interesting data point of the day for investors,” Jefferies analyst Trevor Williams said in a report. “We believe it provides a necessary framework for mapping medium-term margin expansion.”
Square’s relative strength rating is just 12 out of the best possible 99, according to IBD Stock Checkup.
If you are new to IBD, consider taking a look at its stock trading system and CAN SLIM basics. Recognizing chart patterns is one of the keys to investing guidelines.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
Best Growth Stocks to Buy and Watch: See IBD Stock List Updates
How to use the 10 week moving average to buy and sell