1 Spectacular Fintech Stock Down 80% to Buy Hand Over Fist in April

Yahoo

05-04-2025

Numerous secular trends have shaped the economy and influenced consumer behavior in the past decade. One area that continues to show promise is at the intersection of financial services and technology. An increasingly digital world will help propel this sector for years.
Investors won't struggle to find fintech stocks to invest in. But there's one enterprise with a strong position among both merchants and consumers that deserves a closer look, especially since its shares are currently trading 79% off their peak (as of April 2).
Here's the stock to buy hand over fist in April for investors looking to gain fintech exposure in their portfolios.
It's not often you find a company that caters to two completely different audiences. That's exactly what Block (NYSE: XYZ) does. Its Square segment serves merchants with various commerce tools, while Cash App is a personal finance app for individuals. Both have experienced rapid adoption.
In Q4 2024, Square posted gross profit growth of 12% on a year-over-year basis. This segment handled gross payment volume of $59 billion during the period, up 10% from Q4 2023. Cash App's gross profit rose by an even better 16%. Executives are focused on increasing paycheck deposits on the platform.
However, there are concerns about competitive forces. Analysts at Morgan Stanley pointed out that Square is giving up market share to its rivals in the space. Perhaps merchants are being more discerning based on price or breadth of offerings, but the field is certainly crowded.
Cash App, on the other hand, currently has 57 million monthly active users. That's a large figure. The issue, though, is that it hasn't changed in four straight quarters. The bright spot is that penetration of Cash App Card accounts is rising.
Management remains hopeful, as you'd expect. In the company's Q4 2023 investor presentation, it was revealed that they believe Square ($130 billion gross profit total addressable market) and Cash App ($75 billion TAM) are staring at massive opportunities. These figures have expanded considerably every three years, so they could be higher in the future. This gives investors optimism over the long term.
Regardless of what recent trends might tell us, investors won't struggle to become bullish on the business. Here are a few reasons to favor Block, besides the previously mentioned growth potential.
First, as a mission-critical financial partner for its merchant and consumer base, the company's various offerings are certainly essential in the day-to-day lives of its customers. Consequently, there are probably switching costs present.
Think of the headache it would cause if a retailer decided to change to an entirely new payments system or integrate with different software and services, forcing employees to onboard again. And imagine the process of changing banking providers if you're an individual.
Block's profit trend is another reason to be bullish. Its operating income totaled $892 million in 2024, versus a nearly $280 million operating loss the year before. Wall Street analysts see this metric rising at a compound annual rate of 63% over the next three years. Ongoing cost controls are helping, with Block showing how lucrative a scaled fintech enterprise can be.
Block's focus on Bitcoin, namely that it directly owns the crypto, sells a hardware wallet, develops mining equipment, and wants to make it more usable for people, might rub some investors the wrong way. But as someone optimistic about Bitcoin over the long term, the belief is that this could be a big value creator for Block.
Investors have become incredibly pessimistic about this company. The stock trades about 80% below its record from the summer of 2021, at a forward P/E ratio of 12. The valuation is yet another reason to consider adding Block to your portfolio in April.
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Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Block. The Motley Fool has a disclosure policy.
1 Spectacular Fintech Stock Down 80% to Buy Hand Over Fist in April was originally published by The Motley Fool