Block (SQ) Cheap Growth Stock Potential Opportunity
$Block(SQ)$ have been trading between $60 to $66 from 12 August 2024, and this has given us opportunity even if we missed the lows in earlier August.
So in this article I would like to discuss why Block (SQ) would be a potential buy before rate cut and why the low stock price is a good buy.
Growth stocks rarely come this cheap
As we have seen other growth stocks which tend to be expensive, so when companies have a proven record of growing revenue at double-digit rates for years at a time, we can see that the market prices shares accordingly.
There are two ways to buy growth stocks at a discount. The first is to invest early, before a track record of growth appears. The second is to buy growth stocks during a period of turmoil. That is the exact opportunity with Block stock today.
At its core, Block is a payments company. Its Square payment processing platform is used by millions of businesses every day. But the company also owns other notable assets, like Tidal, the music streaming platform founded by Jay-Z, and Cash App, the popular peer-to-peer money transfer service. With a tech-heavy approach to growing industries, Block has averaged revenue growth rates of nearly 50% annually.
As you can see in the chart above, Block's growth rates have come down in recent quarters. Still, over the past four quarters, revenue growth rates have ranged between 24% and 26%. This is still very much a company experiencing rapid growth.
At just 1.76 times sales, Block stock trades at a cheaper valuation than at its IPO in 2015. Slower growth rates are partially to blame, but the biggest detractor appears to be an inability to remain profitable.
Block (SQ) Intrinsic Value
The intrinsic value of SQ stock under the Base Case scenario is 94.79 USD. Compared to the current market price of 65.78 USD, Block Inc is Undervalued by 31%.
The Intrinsic Value is calculated as the average of DCF and Relative values: DCF Value is 87.95 and Relative Value is 101.64.
So we have the potential to go towards the intrinsic value.
Block (SQ) Technical (MACD, KDJ)
If we looked at the MACD, we are going to witness a bullish MACD crossover today (17 Sep). This is the second bullish crossover since August 2024 and each time it has occurred the price has made its wat to the top of the current trend channel.
Currently the channel intersects near $65.78, providing a reasonable target based on current conditions.
We have another confirmation from KDJ where we saw an upside formed by rising J value, the trend have been positively on the upwards movement.
Summary
If we looked at how Block(SQ) have been performing in recent weeks when rate cut anticipation have started, there is opportunity to buy this growth stock, but I believe at the current price, it is still a good price entry.
Appreciate if you could share your thoughts in the comment section whether you think Block is a potential buy with its stock price lower than the intrinsic value.
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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