Block's gross profit should grow
JPMorgan analyst Tien-tsin Huang recently gave Block (SQ 0.92%) an "overweight" rating with a price target of $200. Huang says that Block's acquisition of buy now, pay later fintech Afterpay will boost Block's gross profit growth to 26% per year on average until 2024. Block should easily be able to achieve this given that it has increased gross profits by 29% on average during the past three years.
Afterpay, a company that allows consumers to pay back purchases over six weeks with no interest, helps Block connect its consumer and seller segments. Additionally, although some will say $29 billion was too much to pay, Block gets some serious benefits in return: more than 16 million customers and 100,000 merchants on its platform. The Afterpay platform will help improve Block's product offerings.
Block is focused
Block changed its name from Square in December, highlighting the company's new focus on building a crypto-based financial ecosystem, not just a point-of-sale hardware company. Also, Block's Chief Executive Officer Jack Dorsey resigned as CEO of Twitter. Twitter shares rose on the news, and Dorsey's move should be good news for Block in the long run as well. Instead of splitting his time between two companies, Dorsey can devote his full time and passion to Block's mission of helping every business "participate and thrive in the economy."
*Stock prices used were the midday prices of Feb. 3, 2022. The video was published on Feb. 3, 2022.