To The Moon

$Block(SQ)$

Buy now?

Bread-and-Butter business going strong. Block's Seller business is healthy, with Gross Payment Volume (GPV) up 43% y/y as card-present volumes grow in tandem with increased in-person activity with relaxed COVID-19 measures. Cash App remains central to Block's business with its easy-to-use, cheap proposition bringing convenience to users. Although some temporary lower growth rates in 1H22 is expected as COVID-stimulus rolls off, Cash App is likely to sustain a growth rate of >30% y/y in the mid-term. It has expanded into the kids' finance category as SQ widens its total addressable market by targeting the 13-17 year old demographic. The eventual integration of Afterpay is likely to enhance Cash App's commercial application. Cash App also allows for crypto trading, and has benefited from continued interest in the cryptocurrency market.

Increasing market size by targeting larger sellers and growing international presence. Block's main customer base has typically comprised of smaller merchants. The company is now working on attracting mid to larger-sized merchants by offer more complex payment features and customer management tools. This move has met with success, with the midmarket seller segment growing to 37% of total GPV in Sep 21 vs 28% two years ago. Block is also focused on growing its international presence by launching into new markets outside of the US (which accounted for c95% of revenue in FY19), and has pushed into UK, Australia, Canada, Ireland and France.

Diversification of revenue streams via new business lines such as Buy-Now-Pay-Later (BNPL) with acquisition of AfterPay. Block changed its name from Square in November 2021 to signify that its business lines had diversified sufficiently from its primary segment (Seller via the Square product). Current business lines include Cash App, Spiral (formerly Square Crypto), Tidal (global music streaming services), and TBD54566975 (open developer platform for easier access to blockchain technologies and Bitcoin). Block entered the Buy-Now-Pay-Later space via announcing the acquisition of Afterpay for USD29bn (Jul 21), a global platform with >16m consumers and 100,000 merchants (at Jun 21). This transformational acquisition is expected to bring long-term value accretion and revenue synergies, as it would facilitate a stronger connection between the Seller and Cash App ecosystems.