Softer-than-Expected Guidance and Results Weighed on Block, Inc.'s (XYZ) Shares

Baron Funds, an investment management company, released its “Baron FinTech Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. U.S. equities closed 5% lower in Q1, following a sharp decline in March. Markets started well with the S&P 500 Index reaching new highs. However, concerns about tariffs, inflation, and softer economic growth, along with concerns about AI secular growth, contributed to risk-off conditions. In the first quarter, the fund fell 1.31% (Institutional Shares) compared to a -7.52% return for the FactSet Global FinTech Index (Benchmark) and a -4.27% decline for the S&P 500 index. Since its inception, the fund has appreciated at an annualized rate of 11.27%, compared to a 2.22% return for the Benchmark. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, Baron FinTech Fund highlighted stocks such as Block, Inc. (NYSE:XYZ). Block, Inc. (NYSE:XYZ) is a technology company that focuses on commerce and financial products and services. The one-month return of Block, Inc. (NYSE:XYZ) was 1.12%, and its shares lost 11.46% of their value over the last 52 weeks. On May 23, 2025, Block, Inc. (NYSE:XYZ) stock closed at $58.74 per share with a market capitalization of $36.126 billion.

Baron FinTech Fund stated the following regarding Block, Inc. (NYSE:XYZ) in its Q1 2025 investor letter:

"Block, Inc. (NYSE:XYZ) provides point-of-sale technology to small businesses and operates the Cash App ecosystem of financial services for individuals. Shares fell after the company reported quarterly results and near-term guidance that were softer than expected. In the fourth quarter, gross profit growth of 14% and EPS growth of 51% were strong overall but missed Street expectations. Also, investors took a skeptical view of the 15% gross profit growth guidance for 2025 since it implies acceleration throughout the year in an uncertain macroeconomic environment. Nevertheless, management reiterated their expectation of achieving the “Rule of 40” investment framework in 2026 with mid-teens gross profit growth and a mid-20% operating margin. We continue to own the stock due to Block’s long runway for growth, sustainable competitive advantages, and innovative product offering."

Block, Inc. (NYSE:XYZ) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 76 hedge fund portfolios held Block, Inc. (NYSE:XYZ) at the end of the first quarter which was 81 in the previous quarter. While we acknowledge the potential of Block, Inc. (NYSE:XYZ) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Block, Inc. (NYSE:XYZ) and shared billionaire Ken Griffin’s midcap stock picks with huge upside potential. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.