SQ - Block: Wonderful Company At A Fair Price
2024-05-27 12:48:16 ET
Summary
- Block is a unique company that leverages two strong ecosystems simultaneously.
- Having two ecosystems allows to exercise strong cross-selling power and increase switching costs for customers. This is a strong blend to build sustainable value for shareholders.
- In my opinion, a company like Block deserves a notable premium to its fair value. At the same time, my valuation analysis suggests that the stock is approximately fairly valued.
Investment thesis
I like companies which leverage robust ecosystems as this approach creates strong cross-selling opportunities and increases switching costs for customers, a formidable mix to build sustainable value for shareholders. In this respect, Block, Inc. ( SQ ) is a unique company because it leverages two ecosystems simultaneously. This creates massive opportunities for the company to drive strong revenue growth for longer. The business looks resilient to challenges and its wide diversification across different revenue streams is also an indicator of strength. The company is financially well-equipped to continue investing in innovation and differentiation, which will likely help in building a moat. My valuation analysis suggests that the stock is approximately fairly valued, which is a compelling opportunity for such a stellar business. Block is certainly a "Strong Buy" for me because there is a quote from the great Warren Buffett, which is one of my most favorable ones....
Block: Wonderful Company At A Fair Price