Unlocking Growth Potential: Why Cathie Wood’s Top Pick is a Compelling Buy
Investors seeking inspiration for their next move often turn to renowned asset managers, such as Cathie Wood, who leads Ark Invest. Her flagship product, the Ark Innovation ETF, boasts fintech giant Block (NYSE: SQ) as its eighth-largest holding. With the stock trading below $100 per share, the question is: should you buy in?
A Bullish Outlook on Fintech
Cathie Wood and her team are enthusiastic about several technological trends, including the fintech industry. They believe companies offering holistic financial solutions will thrive, and Block is at the forefront of this movement. The business’ vertically integrated offerings, such as digital wallets, bank accounts, and debit cards, are poised to create a powerful closed-loop payments system.
Growth Potential Abounds
Block’s growth prospects are undeniable. Through the first nine months of 2024, the company reported a 20% year-over-year increase in gross profit, driven by double-digit gains in both its Square and Cash App segments. The merchant side saw significant growth, with $59.9 billion in gross payment volume processed in the three-month period ending September 30. Meanwhile, Cash App boasts 57 million monthly active users, with the Cash App Card driving further adoption and revenue growth.
Streamlining Operations for Efficiency
Like many tech-enabled companies, Block has focused on streamlining its operations to drive greater efficiencies. This effort is paying off, with the business posting $323 million in operating income in the third quarter – a significant reversal from the $10 million operating loss reported in the year-ago period. Management has upped its full-year 2024 guidance, calling for an adjusted operating margin of 18%.
A Compelling Buy Below $100
Block shares, once among the best-performing on Wall Street, have taken a hit, trading 67% off their all-time high. However, with a forward price-to-earnings ratio of 25.9, the stock looks like a reasonable buy for those who believe in its continued growth. Cathie Wood is bullish on Block’s prospects, and recent trends suggest this optimism is warranted. If you’re looking for a compelling investment opportunity, Block might be the perfect addition to your portfolio.
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