We recently published a list of the 7 most undervalued blockchain stocks to buy, according to analysts. In this article, we’ll take a look at where Block, Inc. (NYSE:SQ) stands against other most undervalued blockchain stocks and whether you should buy it, according to analysts.
Transforming finance: The impact of blockchain technology
The blockchain industry is witnessing significant trends that will shape its future and expand its use cases across various sectors. One of the most notable trends is the growth of decentralized finance (DeFi). Decentralized Finance (DeFi) is transforming the traditional financial system by providing peer-to-peer financial services on public blockchains without intermediaries.
Established financial institutions are increasingly adopting blockchain technology to increase transparency and efficiency. According to a report by The Business Research Company, the global market for blockchain in banking and financial services is valued at $4.61 billion in 2023. This market is expected to expand significantly at a compound annual growth rate (CAGR) of 40.4% in 2024. In 2028, it is expected to reach $27.69 billion by the end of the forecast period.
According to the 2024 Cryptocurrency Geography Report by American blockchain analysis company Chaineries, global cryptocurrency activity is on the rise. From Q4 2023 to Q1 2024, total global crypto activity increased significantly, surpassing levels seen during the 2021 crypto bull market.
In January 2024, the U.S. Securities and Exchange Commission (SEC) approved the first spot Bitcoin exchange-traded fund (ETF), marking a significant milestone for the crypto market. This approval led to a surge in Bitcoin activity across all regions, especially those with institutional-scale remittances and high-income countries such as North America and Western Europe. Meanwhile, stablecoin usage saw higher growth in retail and occupational remittances, particularly in low-income regions such as sub-Saharan Africa and Latin America. The Crypto Geography report also shows strong year-on-year growth in DeFi services, particularly in regions such as Sub-Saharan Africa, Latin America, and Eastern Europe.
Cryptocurrency investing is becoming more mainstream, with Bitcoin ETFs being institutionalized. However, blockchain technology and tokenization also have the potential to disrupt the traditional ETF model. On September 28, CNBC reported that Janus Henderson, one of the world’s leading asset management groups, announced the launch of Anemoi Liquid Treasury Fund (LTF), a tokenized fund that provides investors with direct access to short-term funds in the United States. It was reported that they have announced a partnership with Anemoi Limited and Centrifuge for the launch. Treasury bills. Nick Charney, head of innovation at Janus Henderson, emphasized that the development does not represent a threat to the ETF industry, but rather an evolution in providing investment services to clients more efficiently.
This new fund maintains the typical features of an ETF while allowing trading on blockchain platforms. This provides investors with benefits over those offered by traditional ETFs, including 24/7 trading, instant settlement, and increased transparency regarding fund holdings. Charney said the company aims to be at the forefront of this opportunity, which reflects the broader trend of integrating blockchain into financial services.
These trends highlight the growing interest in blockchain technology and its potential to reshape financial systems around the world.
methodology
To compile our list of the 7 most undervalued blockchain stocks to buy, according to analysts, we reviewed our own rankings, screened ETFs, and consulted various online resources. . From an initial pool of over 30 stocks related to the blockchain space, we focused on stocks trading at less than 23 times forward earnings as of October 4th. This helped identify stocks that were cheaper than the S&P 500 index with expected P values. /E is 23.6 as of October 4th (according to WSJ).
We included only stocks that are estimated to have positive earnings growth this year. From this list, we selected stocks that analysts believe have the greatest growth potential. Finally, we ranked the 7 most undervalued blockchain stocks to buy, according to analysts, based on average price target upside potential as of October 4, 2024.
We also noted hedge fund sentiment surrounding each stock, pulled from Insider Monkey’s database of 912 elite hedge funds as of Q2 2024.
Why do we care what hedge funds do? The reason is simple. Our research shows that by mimicking the top stock picks of the best hedge funds, you can outperform the market. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, outperforming the benchmark by 150 percentage points (Learn more ).
People who use Cash App to pay for goods and services. It highlights the impact of the company’s payment tools.
Block Inc. (NYSE:SQ)
Expected PER: 14.41
Revenue growth rate: 98.90%
Analyst upside potential: 34.29%
Number of hedge fund holders: 59 people
Block Inc. (NYSE:SQ), formerly known as Square, is a global technology company with a focus on financial services and significant involvement in the cryptocurrency space. The company changed its name in 2021 to reflect the increased focus on cryptocurrencies and blockchain technology.
The company offers a variety of products and services. Its flagship product, Square, helps businesses manage payments and operations through an integrated ecosystem of commerce solutions. Cash App allows users to send, spend, and invest funds in stocks and Bitcoin. Block Inc. (NYSE:SQ) supports the blockchain industry through its subsidiary TBD, which is focused on creating open platforms for accessing Bitcoin and other blockchain technologies. Through Spiral, the company is also building a free, open-source project that promotes the use of Bitcoin for economic empowerment, further strengthening its commitment to the blockchain space.
The company’s business model meets the needs of a variety of customers, from small businesses to individual users, and generates multiple revenue streams. On top of that, Block Inc. (NYSE:SQ) continues to explore new ways to innovate in the cryptocurrency space.
On July 10, Block Inc. announced a significant partnership with Core Scientific, one of the largest Bitcoin miners in North America, to supply advanced 3-nanometer (3nm) mining ASICs to power its Bitcoin mining operations. announced. The ASIC mining chip was built by Block’s Proto team. By integrating these new ASIC chips into Core Scientific’s infrastructure, this partnership will decentralize Bitcoin mining and increase the It aims to foster innovation. The Proto team is developing a modular mining platform designed to improve the efficiency, reliability, and sustainability of large-scale mining operations. Block Inc. (NYSE:SQ) has the potential to become a major player in the crypto mining space.
In the second quarter of 2024, Block Inc. (NYSE:SQ) reported impressive financial results with gross profit reaching $2.23 billion, an increase of 20% year-over-year. Square generated gross profit of $923 million, up 15% year-over-year, while Cash App saw an even bigger 23% increase to $1.3 billion. This performance demonstrates the strength of Block’s diversified business model and ability to adapt to market demands, particularly through Cash App, which is a key driver of revenue.
The company’s profitability metrics also showed notable improvement in the second quarter. Operating income was reported at $307 million, with adjusted operating income at $399 million. Specifically, adjusted EBITDA nearly doubled year over year to $759 million, reflecting significant improvements in efficiency and effective cost management. Block Inc. (NYSE:SQ) had adjusted free cash flow of $1.43 billion in the fiscal year that ended in June, more than double the year-ago period, demonstrating strong cash-generating capabilities.
Block, Inc. (NYSE:SQ) trades at just 14 times forward earnings. Analysts are also bullish on SQ. The median 12-month price target set by analysts indicates a potential upside of 34.29% from current levels.
By the end of the second quarter of 2024, Block Inc. (NYSE:SQ) was held by 59 hedge funds. ARK Investment Management became the largest shareholder, with a share value of $534.78 million. According to analysts, SQ ranks in the top 5 of the most undervalued blockchain stocks to buy list.
Overall SQ ranks 5th on the list of most undervalued blockchain stocks to buy, according to analysts. While we recognize SQ’s potential as an investment, we believe AI stocks have a better chance of delivering higher returns in a shorter time frame. If you’re looking for AI stocks that are more promising than SQ but are trading at less than 5x P/E, check out our report on the cheapest AI stocks.
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Disclosure: None. This article was originally published on Insider Monkey.
