To The Moon

Recently $Block(SQ)$ has announced on May 6 its intention to issue $1.5 billion in senior notes via a private placement targeted at qualified institutional investors. This debt offering is to help Block to keep up their growth and acquisitions.

Block intends to use the proceeds from this sale for several purposes including the repayment of existing debt, potential acquisitions and strategic transactions, capital expenditures, investments, and bolstering its working capital.

Yesterday (24 June) we saw that Block gathered gain of $64.40.

Block’s Strong Financial Position and Debt Strategy

Block has been strongly positioned to benefit from growth in the payments and consumer financial services sectors. Since the IPO, Block has primarily utilized the convertible debt market for its external funding requirements.

As of March 2024, Block reported about $2.15 billion in outstanding convertible notes, a $775 million revolving credit facility available until June 2028, and $2 billion in senior unsecured notes due in 2026 and 2031.

The addition of the new debt from this latest issuance is expected to aid in refinancing obligations maturing in 2025 and 2026, while also enhancing the company’s solid balance sheet.

Jack Dorsey, co-founder of Block, has been a pioneer in integrating Bitcoin into the company’s balance sheet. In a recent shareholder letter, Dorsey disclosed that Block commits to allocating 10% of its gross profit from Bitcoin-related products to further Bitcoin purchases every month. This strategy has led to the acquisition of $220 million worth of Bitcoin between the fourth quarter of 2020 and the first quarter of 2021.

Strong Q1 2024 Performance For The Fintech Company

Block’s financial performance has surpassed market expectations in the first quarter of 2024. The company’s Bitcoin-related gross profit stood at $80 million, which constitutes 3% of its total $2.73 billion Bitcoin revenue. Moreover, its mobile payments and cryptocurrency platform, Cash App, recorded $1.26 billion in gross profits for the quarter, marking a 25% increase from the previous year.

Overall, the company achieved a gross profit of $2.09 billion in the first quarter, a 22% increase from the same period last year, with total revenues reaching $5.96 billion and per-share earnings of $0.85, exceeding analysts’ forecasts. 

Block has given investors a 4.29% for one year period from its stock price, and I foresee that this return would be higher when the next earnings on 01 Aug 2024 should see Block reporting a better revenue and earnings per share.

Debt-to-Equity Ratio At 26.8%

Block has a total shareholder equity of $19.0B and total debt of $5.1B, which brings its debt-to-equity ratio to 26.8%. Its total assets and total liabilities are $35.6B and $16.6B respectively

Block Assets Exceed Liabilities

Block’s short term assets ($20.5B) exceed its short term liabilities ($12.5B), on the long term, Block’s long term assets ($15.07B) exceed its long term liabilities ($4.1B).

MACD and KDJ Indicator Show Potential Upside

I personally feel that it is a good time to consider Block as from the technical indicators, MACD and KDJ, both are showing bullish upside signal.

MACD is showing upside crossover, and KDJ is turning to bullish upside move. From yesterday trading, Block have gained 2.27%.

Estimated Price Target Of $70 Is Next

If we looked at how Block would be trading over the next few weeks, we could possibly see Block hitting the first price target of $70.

From the MACD and KDJ, it looks possible, but I would still continue to monitor the price action.

Summary

Block strategy of using debt issuance to fund its growth expansion, this could create a win-win situation for the company as well as its investors, there are potential in this fintech company as there have been continued growth in the payments and consumer financial services sectors.

Appreciate if you could share your thoughts in the comment section whether you think Block would continue its upside before reaching the $70 dollar target.

@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.