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Block (SQ) Stock: Assessing Valuation After Recent Share Price Pullback

Simply Wall St · 08/22 10:27

Block (NYSE:XYZ) has recently caught investors’ attention with a dip in its share price, closing at $74.09 after shedding nearly 7% over the past month. There is no single dramatic headline driving this move, but the price action is hard to ignore, especially for investors trying to judge whether the drop is an early signal of changing sentiment or simply noise. For anyone considering adding to or trimming their position, the real question becomes whether this pullback offers genuine value or if there is something fundamental shifting in how the market views Block’s potential.

Zooming out, Block’s longer-term performance has swung between recovery and uncertainty. Although the past three months brought an encouraging 26% rally, the stock is still down nearly 15% this year. Over the past year, shares have climbed 16%, suggesting some momentum is trying to build, but it is a far cry from the levels seen several years ago. Meanwhile, revenue growth remains positive, but net income has slipped in the latest annual numbers, pointing to a business in transition as market appetite for growth is weighed against signs of volatility.

With the stock sliding recently after a decent run earlier in the year, investors are left to consider whether this is a rare buying opportunity for Block or if the market is simply pricing in all the future growth already.

Most Popular Narrative: 14.7% Undervalued

According to community narrative, Block is trading notably below its analyst-derived fair value. This suggests the share price could have more room to rise if future assumptions are realized.

The rapid acceleration in new product launches, especially around peer-to-peer features (like Cash App Pools) and integration of AI into product development, is increasing Cash App's network effects and virality. This is likely driving improved user acquisition and engagement, which supports recurring revenue expansion in future quarters.

Why do analysts consider Block’s true value potentially much higher? The narrative centers on strong growth expectations, ambitious margin forecasts, and a future profit valuation that is typically reserved for the market’s top performers. Interested in which ambitious projections support the estimated upside? Learn how Block’s fintech strategy and these notable quantitative drivers may help explain its valuation premium.

Result: Fair Value of $86.88 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, rising competition and Block’s ongoing reliance on crypto revenues could quickly challenge growth assumptions and reshape the bullish case almost overnight.

Find out about the key risks to this Block narrative.

Another View: SWS DCF Model Offers a Different Perspective

While analyst price targets point to upside, our DCF model suggests Block may actually be trading above its intrinsic value. This highlights how growth projections and risk perceptions can lead to divergent valuations. Which approach do you find more compelling?

Look into how the SWS DCF model arrives at its fair value.
XYZ Discounted Cash Flow as at Aug 2025
XYZ Discounted Cash Flow as at Aug 2025
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Block for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Block Narrative

If you see the story differently or want to follow your own investment process, you can easily build a personalized Block narrative in just a few minutes. So why not do it your way?

A great starting point for your Block research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.