XYZ Strengthens Portfolio With New Square App: Time to Buy the Stock?

Block XYZ is expanding its portfolio with the new Square Point of Sale (POS) app that integrates domain specific commerce and payments functionality into a single, unified app that allows sellers to personalize their offerings. The latest Square Point of Sale app offers seven modes that are purpose built for different industry’s.

XYZ’s comprehensive commerce ecosystem, which enables sellers to combine software, hardware and payment services to accept payments from customers, helps it sustain solid momentum across sellers. The company’s omnichannel offerings, which help sellers create differentiated customer experiences on the back of customer insights by managing orders from POS and eliminating manual aggregation of online and in-person orders, are adding strength to its seller base. 

Square is benefiting from strong demand for its POS solutions. In early April, Square inked a technology partnership with Bluestone Lane, under which the former replaced its legacy system with Square’s all-in-one technology platform across its 65 locations. Apart from an expanding Square business, portfolio strength is expected to drive XYZ’s Gross Payment Volume. 

However, Block shares have dropped 32.2% year to date, which can be attributed to intensifying competition in the fintech industry. A challenging macroeconomic environment with the growing risk of a recession, attributed to U.S. President Donald Trump’s plan to levy tariffs on trade partners, such as China, Canada and Mexico, is expected to be an overhang on the stock.

XYZ Stock’s Performance

Over the same timeframe, Block shares have underperformed close competitors such as PayPal PYPL, Affirm AFRM and Shopify SHOP. Year to date, PayPal, Affirm and Shopify shares have dropped 23.7%, 18.3% and 8.2%, respectively.

So, what should investors do with the XYZ stock? Let’s dig deep to find out.

Block’s Top Line to Ride on Strong Portfolio

Block is benefiting from an expanding product portfolio and continuing go-to-market initiatives. XYZ invested significantly in marketing initiatives in the second half of 2024, which, along with a rich partner base and robust field sales strategies, are expected to drive growth in 2025.

Block expects year-over-year gross profit growth of at least 15% despite a headwind of 50 basis points (bps) from unfavorable forex. Adjusted operating profit is expected to be $2.1 billion or a margin of 21% on gross profit, suggesting a 240 bps year-over-year expansion. XYZ expects to exit 2025 at a Rule of 40 run rate and remain on track to achieve the targeted Rule of 40 in 2026. 

Block’s strong positioning in the digital payments industry on the back of its robust payment and POS solutions is a notable driver. The company is investing aggressively in expanding its partner base, aiming to scale its distribution network. Its partnership with Sysco, a leading global foodservice distributor, is expected to help food and beverage sellers operate more smoothly. Apart from the foodservice domain, XYZ is leveraging partnerships to expand in the Buy Now Pay Later platform market.

XYZ’s Cash App and Lyft inked a partnership to bring a customer-friendly payment method to the latter’s customers. Cash App’s partnership with Google Play offers a preferred alternative payment option when checking out on their Android smartphones or tablets.

XYZ’s Earnings Estimates Revision Trends Northward

The Zacks Consensus Estimate for 2025 earnings is pegged at $4.12 per share, up by a penny over the past 30 days. The figure suggests 22.26% growth over the 2024 reported figure.

The consensus estimate for first-quarter 2025 earnings is pegged at 88 cents per share, unchanged over the past 30 days. The figure indicates a 3.53% year-over-year growth.
 

Block, Inc. Price and Consensus

Block, Inc. price-consensus-chart | Block, Inc. Quote

XYZ’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, missing in one and matching in the remaining one, the average surprise being 11.25%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

XYZ Shares Trade at a Premium

Block shares are overvalued, as suggested by the Value Score of C.

In terms of forward 12-month Price/Earnings (P/E), Block is trading at 13.07X compared with PayPal’s 12.5X.

P/E Ratio (F12M)

XYZ shares are trading below the 50-day and 200-day moving averages, indicating a bearish trend.

XYZ Trades Below 50-day & 200-day SMAs

Conclusion

Block’s rich partner base and an expanding portfolio are attractive for investors despite challenging macroeconomic conditions, intensifying competition and stretched valuation. 

XYZ currently has a Zacks Rank #2 (Buy), which means investors should start accumulating the stock right now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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