Block Assembled the Right Pieces

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Block Assembled the Right Pieces
01 Jun 2022
6 min read

News Synopsis

As the market opposes deficit companies, the responsibility for showing a clear path to big profits lies with the once high-growth stocks. Block, the operator of the Square and Cash App, has the elements to make a compelling claim.

Even if the user or e-commerce growth slows, Block's Consumer Cash App is quickly adding ways to monetize existing users and boost their Square seller business through additional financial services. This type of per-user revenue growth is what investors are currently looking for in many fintech companies, from PayPal to the Robinhood market, rather than adding more users.

This growing ability to monetize overtime beyond the peer-to-peer payments business is one of the factors that has helped push Cash App's structural profit margin or profit per dollar of gross profit less variable costs-to 37 cents last year, compared with just 4 cents in 2018.

Block's recent acquisition of split-service Afterpay could also speed things up. Only about 6% of Cash App's annual active accounts were active Afterpay users at the end of the first quarter. But in the first quarter, Cash App generated more than 350,000 leads for Afterpay merchants.

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