Block, Inc.: A Strategic Buy Amid Valuation Discounts and Bitcoin Leadership

Block, Inc. (NYSE: SQ), the fintech conglomerate led by Jack Dorsey, is poised to capture investor attention ahead of its Q1 2025 earnings report on May 1. While near-term challenges such as revenue volatility and regulatory scrutiny linger, the company’s discounted valuation, robust earnings trajectory, and strategic Bitcoin initiatives position it as a compelling long-term investment. Let’s unpack the case for Block as a “buy.”

Valuation: A 23% Discount and Sustainable Growth

Block trades at a 23% undervaluation, according to recent analyst estimates, reflecting market skepticism about its ability to reconcile rapid growth with profitability. However, the company’s fundamentals tell a different story. Over the past five years, Block has delivered 25.8% annual earnings growth, outpacing the Diversified Financial sector’s 9.9% average. Revenue has expanded at a 23.9% annual clip, driven by its ecosystem of brands—Cash App, Square, Afterpay, and TIDAL—while net margins improved to 12% in late 2024, up from just 0.04% the prior year.

This valuation discount appears unwarranted given Block’s $24.1 billion trailing revenue and its focus on high-growth segments like digital payments and crypto infrastructure. Analysts also note that Block’s 13.5% return on equity (ROE), while below industry benchmarks, reflects strategic reinvestment in initiatives such as its Bitcoin ecosystem, which could yield long-term rewards.

Bitcoin Strategy: Institutional Leadership and Technical Innovation

Block’s most compelling long-term catalyst is its Bitcoin-focused strategy, anchored in three pillars:
1. Corporate Treasury Holdings: As of Q1 2025, Block held 8,480 BTC, making it the second-largest corporate Bitcoin holder globally (per Bitwise). This positions the company to benefit from Bitcoin’s price appreciation and reinforces its role as a leader in institutional adoption.
2. Institutional-Grade Products: Through subsidiary Blockstream, Block is launching three Bitcoin investment funds targeting hedge funds, family offices, and asset managers. These include an income-focused fund, a USD yield fund, and an alpha-seeking fund, which could unlock new revenue streams while deepening its influence in crypto markets.
3. Infrastructure Dominance: Blockstream’s advancements in the Lightning Network (e.g., Core Lightning v25.02 upgrades) and hardware wallets like the Jade Plus underscore its technical leadership. These innovations reduce friction for institutional adoption and enhance security—a critical differentiator in an era of rising cyber threats.

Risks and Mitigants

• Revenue Volatility: Block’s Q2 and Q4 2024 results missed revenue estimates, and Q4 impairment charges highlighted execution risks. However, its Cash App—with 57 million monthly active users—remains a growth engine, and strategic moves like the RCRDCLUB acquisition (bolstering TIDAL’s music platform) suggest a focus on synergies.
• Regulatory Uncertainty: Class-action lawsuits and regulatory scrutiny of crypto pose risks. Yet, 47 U.S. states introduced Bitcoin reserve bills in Q1 2025, signaling shifting regulatory tailwinds. Additionally, Block’s partnerships with regulators (e.g., the OCC’s crypto custody guidance) demonstrate proactive compliance.
• Leadership Transitions: Departures like Larry Summers’ board exit in 2024 raised concerns, but Block’s focus on operational continuity—evident in its Proto mining and Bitkey wallet rollouts—suggests stability.

Conclusion: A Buy on Long-Term Vision

Block’s 23% valuation discount, combined with its 25.8% earnings growth rate and Bitcoin-driven innovation, makes it a compelling buy at current levels. While near-term risks like revenue volatility and regulatory hurdles remain, the company’s ecosystem of brands and institutional Bitcoin leadership position it to capitalize on the $56.7 billion corporate Bitcoin market and broader fintech trends.

Key data points reinforce this thesis:
- Bitcoin’s market dominance rose to 62.2% in Q1 2025 as institutions sought safe havens, aligning with Block’s strategic bets.
- Blockstream’s institutional funds drew “strong early interest,” indicating demand for its crypto solutions.
- The company’s $85 billion+ market cap and 29,546% year-over-year earnings spike (due to prior-year losses) highlight its ability to surprise on the upside.

Investors should monitor Block’s May 1 earnings for Q1 revenue trends, Bitkey adoption metrics, and Proto’s progress. Despite near-term turbulence, Block’s valuation and Bitcoin strategy argue strongly for a long-term hold—or even a buy—position.

In an era where financial innovation and decentralization define winners, Block’s blend of fintech scale and crypto vision makes it a standout play on the future of money.