Block (XYZ) Could Be 10% Undervalued Following Square’s Honolulu Cookie Expansion
Block (XYZ) is back in the spotlight after Honolulu Cookie Company expanded its use of Square’s unified commerce platform across 14 locations, connecting the partnership to a new Las Vegas flagship store.
See our latest analysis for Block.
Against this backdrop of new merchant wins like Honolulu Cookie Company, Block’s recent 7 day share price return of 5.3% and 30 day return of 9.16% suggest building momentum, although the 5 year total shareholder return is still down 68.72%.
If this kind of recovery story has your attention, it could be a good moment to broaden your search and check out 18 top founder-led companies
After a 9.16% move over 30 days and a 68.72% decline over five years, Block now sits at an apparent discount to some intrinsic value estimates. The key question is whether that gap still leaves enough potential upside to compensate for the risks from here.
Most Popular Narrative: 9.9% Undervalued
Block's most followed narrative pegs fair value at $90.52 versus the last close at $81.52, framing the recent rebound as only part of the story.
The scaling and innovation within Square for Businesses, highlighted by the launch of new hardware like Square Handheld, adoption of omnichannel commerce tools, and growing field or telesales teams, positions Block to further capture share from the global trend toward digitalization and consolidation of small business commerce, supporting topline growth and eventual margin expansion as the business scales internationally.
Curious what sits behind that fair value for Block? The narrative focuses on the potential for faster revenue growth, stronger margins, and a future earnings multiple typically associated with market leaders.
Result: Fair Value of $90.52 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, Block's heavy exposure to cryptocurrency and its growing Borrow and BNPL products could amplify earnings volatility if regulation tightens or credit losses rise.
Find out about the key risks to this Block narrative.
Another View: How Block Looks On Earnings Multiples
The narrative and DCF style fair value of $90.52 for Block line up with Simply Wall St's $98.21 future cash flow estimate, both pointing to the stock trading at a discount. Yet on earnings, the picture flips, with Block on a P/E of 60.7x versus 15.6x for the US Diversified Financial industry and a fair ratio of 29.5x. That kind of gap raises the question of whether the discount to fair value reflects opportunity or simply optimism about how quickly earnings can catch up.
See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
With both optimism and concern running through the Block story, it makes sense to move quickly, review the underlying data, and weigh the 2 key rewards and 2 important warning signs
Ready for more investment ideas beyond Block?
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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