Numerous secular trends have shaped the economy and influenced consumer behavior in the past decade. One area that continues to show promise is at the intersection of financial services and technology. An increasingly digital world will help propel this sector for years.
Investors won’t struggle to find fintech stocks to invest in. But there’s one enterprise with a strong position among both merchants and consumers that deserves a closer look, especially since its shares are currently trading 79% off their peak (as of April 2).
Here’s the stock to buy hand over fist in April for investors looking to gain fintech exposure in their portfolios.
It’s not often you find a company that caters to two completely different audiences. That’s exactly what Block (NYSE: XYZ) does. Its Square segment serves merchants with various commerce tools, while Cash App is a personal finance app for individuals. Both have experienced rapid adoption.
In Q4 2024, Square posted gross profit growth of 12% on a year-over-year basis. This segment handled gross payment volume of $59 billion during the period, up 10% from Q4 2023. Cash App’s gross profit rose by an even better 16%. Executives are focused on increasing paycheck deposits on the platform.
However, there are concerns about competitive forces. Analysts at Morgan Stanley pointed out that Square is giving up market share to its rivals in the space. Perhaps merchants are being more discerning based on price or breadth of offerings, but the field is certainly crowded.
Cash App, on the other hand, currently has 57 million monthly active users. That’s a large figure. The issue, though, is that it hasn’t changed in four straight quarters. The bright spot is that penetration of Cash App Card accounts is rising.
Management remains hopeful, as you’d expect. In the company’s Q4 2023 investor presentation, it was revealed that they believe Square ($130 billion gross profit total addressable market) and Cash App ($75 billion TAM) are staring at massive opportunities. These figures have expanded considerably every three years, so they could be higher in the future. This gives investors optimism over the long term.
Regardless of what recent trends might tell us, investors won’t struggle to become bullish on the business. Here are a few reasons to favor Block, besides the previously mentioned growth potential.
First, as a mission-critical financial partner for its merchant and consumer base, the company’s various offerings are certainly essential in the day-to-day lives of its customers. Consequently, there are probably switching costs present.
