Down 10% What’s Happening With Block (XYZ) Stock?

Block Inc. (NYSE: XYZ) recently released its Q4 results, with earnings of $0.71 per share on sales of $6.03 billion, compared to the consensus estimates of $0.87 and $6.29 billion, respectively. Block, formerly known as Square, is a fintech company providing digital payments, point-of-sale hardware and software, and other tech-driven financial services. From payment processing to loans and banking, Block now offers a wider range of financial products. Block also enables bitcoin trading by buying the cryptocurrency from private dealers and selling it to users with a modest markup.

Block stock, with 7% returns since the beginning of 2024, has underperformed the S&P 500 index, up 28%. A lukewarm growth in gross payment volume and monthly active users didn’t sit well with investors and weighed on its stock performance over the last year or so. If you are looking for an upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

Image by Gerd Altmann from Pixabay

How Did Block Fare In Q4?

Block’s revenue of $6.03 billion in Q4 reflected a 4.5% y-o-y rise. In terms of revenue segments, transaction revenue grew 5.1% to $1.7 billion, while subscription and services revenue saw the strongest gains, climbing 16.8% to $1.9 billion. Hardware revenue declined 4.3% to $31 million, and Bitcoin-related revenue decreased 3.7% to $2.4 billion. Key metrics for Block showed strong performance, with gross payment volume (GPV) reaching $61.95 billion, a 7.8% year-over-year increase. EBITDA also surpassed expectations, coming in at $757 million, up 34.7% year-over-year. Both GPV and EBITDA figures were above street estimates of $61.3 billion and $740 million, respectively.

In Q4, Block’s profitability surged, as adjusted operating margins jumped to 17%, an 800 basis point improvement over the previous year. Per-share earnings climbed 51% to $0.71. The company’s guidance suggests continued growth, with Q1 gross profit expected to rise 11% to $2.32 billion at a 19% operating margin, and 2025 projections of $10.22 billion in gross profit with 21% operating margins.

What Does It Mean For Block Stock?

Block’s shares plunged 8% in after hours trading following the announcement of its Q4 results. However, this kind of volatility is not unusual for Block stock. Looking at a slightly longer timeframe, XYZ stock has performed worse than the broader market in each of the last four years. Returns for the stock were -26% in 2021, -61% in 2022, 23% in 2023, and 10% in 2024.

In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could XYZ face a similar situation as it did in the last four years and underperform the S&P over the next 12 months — or will it see a recovery? At its current levels of $76, Block stock carries a price-to-sales ratio of 2.0x, below its four-year average of 2.8x. Although recent results were a let-down, we believe Block stock’s current valuation adequately reflects the challenges posed by increased competition and the company’s recent performance. We think that Block stock’s current valuation offers an attractive entry point for robust long-term gains.

While Block stock looks like it has room for growth, it is helpful to see how its peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 2/21/2025
[2] Cumulative total returns since the end of 2016

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