Should You Buy, Sell or Hold Block Stock Before Q1 Earnings?

Block XYZ is set to report its first-quarter 2025 results on April 30.

The Zacks Consensus Estimate for first-quarter revenues is currently pegged at $6.18 billion, indicating growth of 3.81% year over year. 

The consensus mark for earnings is currently pegged at 88 cents per share, unchanged over the past 30 days. The figure indicates a 3.53% jump from the year-ago quarter’s reported figure.

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

Block, Inc. Price and EPS Surprise

Block, Inc. price-eps-surprise | Block, Inc. Quote

Let’s see how things are shaping up prior to this announcement.

Key Factors to Consider for XYZ’s Q1 Earnings

Block’s robust product portfolio has been a key factor in driving up Gross Payment Volume (GPV). In the fourth quarter of 2024, Block processed $61.95 billion of GPV, up 7.8% year over year. Strength across the Square ecosystem on the back of its strong banking products and point-of-sale (POS) solutions are likely to have contributed well to GPV in the to-be-reported quarter.

Cash App usage is expected to have grown in the to-be-reported quarter with the launch of Afterpay on the Cash App card. 

A strong product portfolio and partner base are expected to drive the top line as well as profitability. XYZ expects gross profit to grow 11% year over year to $2.32 billion in the to-be-reported quarter. Adjusted operating income is expected to be $430 million, while adjusted operating margin is anticipated to be 19%.

However, unfavorable forex is expected to have hurt Block’s results in the to-be-reported quarter. The company’s investment in marketing is expected to keep margins under pressure.

Block Shares Lag Sector, Industry

Block shares have declined 31% year to date (YTD), underperforming the Zacks Computer & Technology sector’s decline of 11.1% and the Zacks Internet Software industry’s fall 6.2%. A challenging macroeconomic environment with the growing risk of a recession due to higher tariffs has hurt Block shares. 

Over the same timeframe, Block shares have underperformed close competitors such as PayPal PYPL and Affirm AFRM. YTD, PayPal and Affirm shares have dropped 23.8% and 19.5%, respectively.

XYZ Stock’s Performance

XYZ stock is not so cheap, as the Value Score of C suggests a stretched valuation at this moment.

In terms of Price/Cash Flow, Block shares currently trade at 21.84X, higher than the sector’s 18.75X, PayPal’s 8.84X and Affirm’s 21.6X.

Price/Cash Flow (P/CF)

Strong Portfolio, Rich Partner Base Aids XYZ’s Prospects

Block’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. 

Block is expanding its portfolio with the new Square 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 industries.

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.

Cash App’s partnership with Alphabet’s GOOGL Google Play offers a preferred alternative payment option when checking out on their Android smartphones or tablets. Afterpay’s BNPL offering is now available to Alphabet’s Google Play users. The expansion bodes well for the Afterpay division, on which Block estimates that consumers have spent more than $72 billion since its acquisition. Per XYZ, consumer cohorts on the platform for over five years transact more than 31 times per year on average compared with four times for those who joined in the past year.

Block Shares - Buy, Sell or Hold?

Block’s strong portfolio offerings and an expanding partner base are key long-term drivers. Hence, investors who already own the stock should benefit from these drivers over the long haul.

However, challenging macroeconomic conditions and sluggish trends in consumer spending are concerning for XYZ. Block expects operating margin expansion in 2025 to be lower than 2024, attributed to a high level of investments around go-to-market initiatives. A stretched valuation makes the stock a risky bet.

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

XYZ Shares Trade Below 50-Day & 200-Day SMAs

Currently, Block carries a Zacks Rank #3 (Hold), which implies that investors should wait for a better entry point to accumulate the stock. 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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