ASX:XYZ
Block CDI
Investment Summary
The fund managers believe that Block CDI, despite recent volatility, remains a compelling investment opportunity due to its substantial growth potential and strong market position. In their opinion, the company's robust liquidity, with approximately $7 billion available, positions it well for aggressive growth pursuits, particularly in enhancing brand marketing and leveraging new app verticals. Concerns around competition, regulatory scrutiny, and consumer sentiment have created skepticism, reflected in recent share price fluctuations. However, they note impressive metrics such as over $200 billion in processing volume and 60 million active users, underpinning Block's operational strength. Additionally, projected earnings growth of around 30% paired with an undemanding valuation at 12x P/E contribute to its attractiveness. Overall, they assert that Block's dedication to expanding services and improving profitability, demonstrated through initiatives like Cash App Borrow, enhances its long-term value for shareholders.
Commentary From The Managers
Endeavor Asset Management
31 Mar 2025
$86.47
- Block (formerly Square, XYZ) detracted from performance during the month.
- There was no deterioration in company-specific fundamentals.
- The company secured FDIC approval to roll out its Cash App Borrow product nationwide.
- This product targets short-term liquidity needs and offers sub-$100 loans.
- Block's loans have low default rates and pricing that is better than traditional payday lenders.
- Block will assume full control over the origination and servicing of these loans, totaling close to $9 billion in 2024.
- This expansion complements Block’s mission to improve financial access and enhances user engagement with the Cash App.
- Existing offerings like Square Loans and Square Savings are further supplemented by this new product.
- Trading on 11x FY26e P/E, with expected growth over 25%.
- Endeavor Asset Management continues to hold because Block offers compelling long-term value for shareholders.
Ten Cap
28 Feb 2025
$103.09
- Ten Cap continues to have a positive outlook on Block CDI despite a soft start to the year.
- Key metrics such as US gross payment volume (GPV) and payroll deposits exceeded expectations.
- Concerns around the US consumer contributed to a multiple de-rate.
- Ten Cap remains confident in Block’s long-term potential.
- The company’s valuation is increasingly attractive.
- Anticipated exit rate of “rule of 40” in CY2025 supports their thesis.
Endeavor Asset Management
28 Feb 2025
$103.09
- Block Inc. (XYZ) shares fell post 2024 earnings due to investor concerns despite reasonable results.
- Gross profit rose 18% and EBITDA increased 69% to $3.03 billion, showcasing strong efficiency.
- Investors expected better Square momentum and clearer credit risk visibility, leading to a sell-off.
- Block anticipates accelerated growth in 2H25, focusing on expanding Square into a full commerce platform.
- Key initiatives, such as Afterpay’s integration with Cash App Card, aim to boost spending.
- While confident in execution, there remains investor caution around credit risks and sustained growth.
- At 12x underlying P/E and 30% expected EPS growth, Block’s valuation is not considered expensive.
- Given its strategy and improving profitability, Endeavor Asset Management increased their position, finding an attractive risk-reward despite near-term concerns.
Blackwattle Investment Partners
28 Feb 2025
$103.09
Endeavor Asset Management
28 Feb 2025
$103.09
- Block Inc. (XYZ) shares fell post 2024 earnings due to investor concerns despite reasonable results.
- Gross profit rose 18% and EBITDA increased 69% to $3.03 billion, showcasing strong efficiency.
- Investors expected better Square momentum and clearer credit risk visibility, leading to a sell-off.
- Block anticipates accelerated growth in 2H25, focusing on expanding Square into a full commerce platform.
- Key initiatives, such as Afterpay’s integration with Cash App Card, aim to boost spending.
- While confident in execution, there remains investor caution around credit risks and sustained growth.
- At 12x underlying P/E and 30% expected EPS growth, Block’s valuation is not considered expensive.
- Given its strategy and improving profitability, Endeavor Asset Management increased their position, finding an attractive risk-reward despite near-term concerns.
Milford Asset Management
30 Nov 2024
$136.02
- Block, Inc. experienced a strong rally of +23.8% following its recent performance.
- Milford Asset Management recognizes Block as an innovative company with a robust brand appeal for both sellers and consumers.
- The company has shown improved profitability and aims to meet the rule of 40 by 2026, targeting mid-teens revenue growth and approximately 25% profit margin.
- The rule of 40 is a financial benchmark assessing a company's combined revenue growth rate and profit margin to reach at least 40%.
- Despite its recent strong performance, Block is still seen as reasonable value by Milford Asset Management.
Endeavor Asset Management
30 Nov 2024
$136.02
- Endeavor Asset Management continues to hold a small position in Block CDI, which saw shares appreciate by 24% in November.
- Block operates two key business segments:
- Cash App: A mobile app for sending, receiving, and managing money.
- Square: Tools for small businesses, including point of sale and payment processing.
- 3Q results indicated revenue and 4Q guidance were below expectations due to cost benefits pushed to 2025.
- Seller Gross Payment Volume (GPV) growth for Q4 is expected to be more modest than market expectations.
- Projected "meaningfully higher" GPV growth in CY25 adds optimism to the investment thesis.
- Block is well-positioned to leverage financial deregulation trends, providing additional growth opportunities.
- Over the past decade, Block has demonstrated remarkable growth:
- Processing Volume exceeds $200 billion in annualized card volume.
- Supports around 4 million active sellers.
- Cash App has more than 50 million active users, establishing it as a leading consumer fintech platform in the U.S.
- Endeavor Asset Management views Block as a compelling investment opportunity due to its vast untapped market, distinctive growth potential, and unique culture.
- Currently trades at an undemanding 19x FY25e earnings with anticipated earnings growth of 22% annually over the next three years.
Endeavor Asset Management
31 May 2024
$98.66
- Block, Inc (SQ2) was a bottom performer, with a share price decline of 14.1% in May.
- Endeavor Asset Management notes concerns over growth prospects and increased competition in the digital payments space.
- There is heightened regulatory scrutiny over the Cash App business contributing to investor uncertainty.
- Despite challenges, Block has no debt maturities until March 2025 and ~$7 billion of available liquidity.
- Projected ~$2.5 billion of free cash flow (FCF) in 2024 supports growth strategies.
- Endeavor Asset Management believes SQ2 will continue to pursue growth ambitions aggressively.
- Focus areas include enhancing brand/product marketing with large merchants and exploring new app verticals.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.