Few large-cap stocks have as much long-term upside as Block (SQ 0.47%). This company is exposed to several large growth markets that could last for several decades.
The best part is that the shares are now on sale after a brief correction. If you're searching for stocks with huge upside that you can buy and hold for years to come, this is your opportunity.
Three big growth trends in one stock
It's not often that a single stock gives you exposure to three major growth markets, but that's the case with Block.
The first opportunity is rising adoption of cryptocurrencies like Bitcoin. In 2021, Square changed its name to Block partially to reflect its growing commitment to blockchain technologies. It now operates several businesses that are directly tied to the rise of crypto. Spiral is an organization it founded to create open-source software that helps spur crypto adoption. TBD is another Block business that is focused on creating developer tools that will help drive crypto innovation. Its Square payment hardware, meanwhile, used by millions of merchants, can now accept Bitcoin as a method of payment. Finally, its Cash App, which is also used by millions of people, has empowered its users to purchase billions of dollars in Bitcoin during the past few years. Put simply, Block is all in on crypto.
The company's Cash App isn't just exposed to crypto. It also allows Block to benefit from the democratization of finance. In a nutshell, this trend describes how people are gaining more autonomy over their money. Whether it's gaining access to new investment classes or being able to send money to friends and family in a fast, free, and easy way, the democratization of finance has already taken the world by storm. A decade ago, it would have been difficult to imagine how much control we would all have over our money simply by using a smartphone. This is a long-term trend that the Cash App is capitalizing on. It gives people the power to transfer or invest their money in seconds, all from the comfort of home. There are competing services, like PayPal's Venmo app, but there's plenty of market available for both services to win.
The final growth trend that Block is directly exposed to is the rise of the creator economy. In music, for example, powerful record labels and executives long maintained near complete control over what music made it to market. Today, anyone can upload their music to the internet for free. In many ways, creators now have more power than ever. That's why, in 2021, Block purchased Tidal, the music streaming platform founded by Jay-Z. The purchase price was nominal -- around $300 million, only 0.6% of Block's current market cap -- but the company gained a meaningful way to participate in the creator economy. It's still unclear how exactly Tidal will fit into Block's broader business strategy, but the purchase was a low-cost way to gain access to yet another growth market.
Is now the time to buy Block stock?
Block has many ways to win long-term. But is now the time to buy Block stock?
Right now is arguably the best time to buy Block stock since 2015, the year of its initial public offering (IPO). Back then, the shares were priced at roughly 3 times sales. That valuation multiple moved higher and higher over the years, surpassing a lofty 15 times sales in 2020. Then came the crash. Block in 2020 was investing heavily in new growth markets just as sales growth began to slow. This caused it to post a string of quarterly losses. The market responded by sending shares sharply lower. Today, the valuation still hasn't fully recovered, with shares priced at just 2.2 times sales.
There's reason to believe a turnaround is on the way. Jack Dorsey, the company's founder, recently stepped back in as chief executive officer to right the ship. Last quarter, the company posted its first profit in years. Meanwhile, Block's portfolio of businesses have many lucrative long-term growth avenues.
Buying high-growth businesses at a discount is a rare opportunity. Years from now, you may regret not investing in Block stock right as its turnaround efforts began to bear fruit.
