What happened
Shares of fintech leader Block (SQ 2.32%), formerly known as Square, were up 4.4% today as of 1:40 p.m. ET. There was no specific financial news from Block that accounted for the rally, but Bitcoin (BTC -1.31%) has been on the rise in recent weeks. Bitcoin is up nearly 16% in the last week alone. Given that Block is betting on the long-term development of the Bitcoin network, this could be a primary reason for the stock's rise today. https://www.coinbase.com/price/bitcoin
Image source: Getty Images.
So what
It's worth noting that Block stock remains over 50% below its all-time high last reached in late 2021. Growth stocks have begun to show signs of life once again after enduring a massive sell-off in recent months. This crash was spurred on by the Federal Reserve's indication it will be raising interest rates this year to combat inflation. Higher interest rates lowers the present value of assets like high-growth stocks.
Put another way, Block will need a lot more than higher Bitcoin prices to reclaim its all-time high. But now that shares have been repriced on expected Federal Reserve actions that will be taken this year, investors can get back to focusing on Block's actual business performance and financials.
Now what
Investors will likely get the next Block quarterly update in late May. But it could be another big year for the financial services technology provider. The acquisition of buy-now, pay-later (BNPL) outfit Afterpay was completed in January, and Block promptly announced BNPL capability was available for merchants on its platform. Block is also expanding internationally where it sees huge demand for its digital payments and e-commerce management platform among small- and mid-sized businesses.
And as for Bitcoin, the original cryptocurrency will likely continue to be a primary driver of new customer onboarding on its consumer-facing Cash App. Once in the ecosystem, Cash App can market its higher profit margin services like debit cards and rewards for Cash App use with participating merchants. That could be a huge driver of Block's profitability in coming years as it promotes more frequent use of Cash App among its large user base.
