Jack Dorsey, a prominent figure in the business world, co-founded two groundbreaking technology companies: Twitter, now rebranded as X and controlled by Elon Musk, and Square, which has undergone a transformation to become Block (SQ). While X dominates headlines with its social media platform, Square, now led by Dorsey, is a formidable player in the financial services sector.
Block, previously known as Square, gained recognition primarily for its payment processing division, initially targeting small businesses but steadily expanding its reach. In addition to its core payment processing services, Block operates Cash App, a popular peer-to-peer payment platform that competes with industry stalwarts like Venmo.
Moreover, Block has made significant strides in the realm of cryptocurrency, particularly Bitcoin. The company not only supports Bitcoin transactions but also actively invests in projects aimed at enhancing Bitcoin’s security and user experience. As of May 8, Block holds a substantial portfolio of Bitcoin valued at approximately $5 billion.
Analysts generally hold a positive outlook on Block, with a majority rating the stock as a buy. Among them is Morningstar analyst Brett Horn, who attributes competitive advantages to Block and assigns the company a narrow moat. Horn’s bullish stance is reflected in his estimate of Block’s fair value at $90, well above its current trading price. He praises Block’s legacy Square business model, characterized by efficient client onboarding, innovative point-of-sale devices, flat fees, and integrated software solutions. Horn highlights Block’s successful transition to serving larger merchants, a move that has contributed to profitable growth and improved margins.
Despite constraints posed by its relatively high pricing, Block’s strength and profitability position it as a compelling candidate for inclusion in the S&P 500 index. Eligibility for inclusion is contingent upon meeting quantitative criteria, including financial viability, public float, liquidity, and company type. Block’s potential addition to the S&P 500 index not only enhances its reputation but also attracts investment from index-tracking funds, potentially bolstering its share price.
Membership in the S&P 500 index symbolizes success and grants access to a vast pool of indexed assets, providing substantial benefits for chosen companies. Should Block secure a spot in the prestigious index, it would signify a significant milestone and further solidify its position as a key player in the financial services industry.