Block's Cash App Woes Send Stock Crashing—Is This a Buy or a Sell?

The investing world is no stranger to gut-check moments, and Block (SQ) just handed shareholders one of the worst. The fintech giant’s Q1 2025 earnings miss was a disaster, with its stock plummeting over 20% on the report—the second-worst single-day drop in its history. The culprit? Cash App’s “stagnation” in user growth and weak monetization, as analysts at RBC and others declared. But here’s the question: Is this a buying opportunity or a red flag that the Cash App train has already derailed?

The Disaster Unfolded: Cash App’s Stagnation

Block reported revenue of $5.77 billion, missing estimates by a mile and marking a 3% year-over-year decline. But the real pain was in its crown jewel, Cash App. Monthly active users (MAUs) flatlined at 57 million for the third straight quarter—0% growth—while inflows grew just 8% to $76.8 billion. Gross profit for Cash App came in at $1.38 billion, below expectations, and discretionary spending (think travel, media) tanked as consumers shifted to essentials. CEO Jack Dorsey admitted they’d lost focus on the “network density” that fuels P2P transactions—the lifeblood of Cash App’s ecosystem.

Analysts weren’t holding back. Benchmark downgraded the stock to Hold, calling stagnant MAUs “more concerning than spending declines.” Wells Fargo warned of “monetization red flags,” and Seaport questioned Dorsey’s strategy with the blunt note: “Will the real Jack Dorsey please stand up?”

The Elephant in the Room: Venmo’s Victory Lap

While Block stumbled, rival Venmo (owned by PayPal) is sprinting. PayPal reported a 20% revenue jump for Venmo in Q1, driven by debit card adoption and checkout integrations. Cash App’s pivot to lending (via its newly approved Cash App Borrow) and banking features? Analysts say it’s a race against time. Venmo isn’t just catching up—it’s lapping Block.

The Bitcoin Bombshell

Adding insult to injury, Block’s Bitcoin division cratered. A $93.4 million loss here—versus a $233.4 million gain last year—pummeled net income to $189.9 million, a 60% drop. Bitcoin’s price fell 12% in Q1, and the company now holds $2.9 billion in crypto assets.

The Bottom Line: Buy the Dip or Bail?

Block’s stock is down over 30% year-to-date, and its valuation now sits at just 1.5x sales—a historic low. Bank of America and Morgan Stanley still see value here, calling it an “attractive entry point.” But the risks are massive:
- User Growth: Cash App’s MAUs have been stagnant for a year. To rebound, Block needs to ignite P2P engagement—a tall order in a crowded space.
- Competition: Venmo’s lead is widening, and Block’s Cash App Borrow rollout is unproven.
- Macro Headwinds: Stagflation fears and weaker consumer spending aren’t going away.

The company’s guidance cut—lowering full-year gross profit growth to 12% from 15%—shows it’s bracing for a rough road. Even if Cash App Borrow takes off, execution risks are sky-high.

Conclusion: A Gamble, Not a Gift

Block’s stumble is undeniable, but is this a buy? The stock’s valuation looks tempting, but the reality is harsh: Cash App’s core metrics are broken, and Venmo is out-executing. While some bulls argue Block’s Square segment (small-business payments) is still strong, it’s not enough to offset Cash App’s struggles.

Unless we see a sudden surge in MAUs—say, 20% growth in Q2—this stock is a gamble. For now, the “Cramer-ometer” says: Stay on the sidelines until Cash App proves it can turn the tide.

Action Alert: If you’re in this stock, consider taking profits. If you’re on the fence, wait for a clearer signal—like a user growth rebound or a blockbuster move against Venmo. For now, the Cash App “woes” aren’t just a headline—they’re a warning.

In Jim’s words: “When your crown jewel is flatlining, you don’t just need a plan—you need a miracle. And miracles are rare in the market.”