We’ve added to Block (SQ)
Oct 16, 2024
On Wednesday, we elected to add to our position in Block (SQ) from our strategic cash holdings on behalf of members in our Flagship strategy.
The trade increased Flagship’s net exposure to ~98%. It’s worth mentioning that Flagship is near its highest net exposure in 2+ years, and the positioning reflects our increased confidence in the direction of equity markets.
Let’s dive in.
Buying more Block
Back in April of this year, we initiated a ‘starter’ position of ~2.5% in Block (SQ) with the intention of sizing up when the risk/reward profile became even more favorable.
Despite volatility over the following months, the stock’s improved technical setup and recent earnings results created a compelling opportunity to add to our position.
You may recall that our thesis is centered on our belief that Block can execute on its profitable growth strategy and achieve the “Rule of 40” by fiscal-year 2026.
Following its recent earnings beat, we believe our “Rule of 40” thesis is tracking nicely and expect Block to reach combined gross profit growth and operating income margin of ~32.5% by year-end.
Furthermore, we believe that Block’s core business has three major levers to pull for continued growth:
Upmarket growth in its Square (Seller) ecosystem, as an improved product release cadence should capture larger sellers
Continued gross profit growth within its Cash App (Consumer) ecosystem - Block strives to become the go-to financial firm by filing in identified product gaps
Adjusted Operating Income margin expansion - Block’s newfound cost discipline has made it a leaner organization
In April, we shared a deep dive on our thesis for Block (SQ), and we’ve reattached the memo here if you’d like to take a closer look at the company's growth profile.
With our thesis tracking ahead of expectations and plenty of greenfield for Block to effectively innovate in a traditionally status-quo oriented sector, we’re excited to size Block up to a core position.
– Your Titan Team
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