Bull of the Day: Block (XYZ)

Sporting a Zacks Rank #1 (Strong Buy) and landing the Bull of the Day, the bull thesis for Block XYZ) stock centers on the idea that the market is undervaluing a business whose core ecosystems — Square, Cash App, Bitcoin, and AI-driven infrastructure — are simultaneously scaling, integrating, and accelerating.

With investors starting to shake off geopolitical concerns in the Middle East, Block stock has spiked more than 10% so far this month, as sentiment is growing for a mix of AI-driven operational changes, new product launches, and expanding partnerships.

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Block Company Overview

Block, Inc. is a diversified financial services and commerce technology company headquartered in San Francisco, California. Founded in 2009, Block operates two primary reportable segments: Cash App and Square, complemented by Corporate and Other operations. The company serves millions of consumers and merchants worldwide through an integrated ecosystem of financial solutions and commerce enablement tools.

Cash App is positioned as a financial operating system for the modern earner, offering peer-to-peer payments, primary banking services, consumer lending, and bitcoin functionality to drive engagement and monetization at scale. Meanwhile, Square provides comprehensive commerce solutions for sellers, combining integrated payments processing, software and automation tools, banking services, and lending capabilities to help businesses streamline operations and scale efficiently across diverse verticals and geographies.

Strong Momentum from AI Initiatives

Block has been aggressively integrating AI across its organization, including replacing traditional managers with “player-coaches” and AI-driven organizational tools.

Block’s player-coaches are a new role within the company’s organizational structure, replacing traditional middle management. These individuals are deeply involved in the decision-making process, using AI tools to inform their own choices and collaborating closely with their teams. The player-coaches are responsible for both individual contributions and the development of talent, effectively taking on the roles of both managers and coaches, aiming to create a more agile and efficient work environment with a focus on collaboration and innovation.  

Also, the launch of "Managerbot", a proactive AI agent, has deepened Block's automation and efficiency gains at a time when investors are rewarding companies that show credible AI execution, especially when it reduces costs and accelerates product development.

Square’s Expanding Partnerships & Product Adoption

Adding fuel to the rally, Block has announced multiple new partnerships and product rollouts this year for Square, strengthening its ecosystem. Listed below, these deals signal strong enterprise adoption and reinforce Square’s position in retail, restaurants, and services.

1. Birch Coffee expanded its NYC footprint using Square’s unified commerce platform
2. GOLFTEC, a global golf instruction and club fitting company with 200+ locations, has adopted Square for payments and infrastructure
3. Square has launched AI-driven restaurant inventory management with MarketMan, a cloud-based restaurant inventory and supply management platform

Cash App Growth & New Financial Features

Cash App is the centerpiece of the bull case, serving over 57 million monthly users and having a strong presence among younger demographics.

Cash App continues to be a major growth engine, introducing “Pay Over Time”, a first-of-its-kind feature that allows customers to convert peer-to-peer transfers into installment plans.

Analysts have noted that Cash App and AI initiatives are driving upside for Block’s stock, giving the company a strong position in the competitive fintech landscape.

Why Block Looks so Undervalued

At $67 a share, Block stock trades at 17X forward earnings, offering a slight discount to its Zacks Internet-Software Industry Average and trading further beneath the S&P 500’s 22X.

More compelling is that Block’s earnings growth is vastly outpacing its peers and the broader market, with FY26 EPS expected to spike 57% to $3.72 from $2.37 per share last year. Plus, FY27 EPS is projected to soar another 30% to $4.84.  

Attributed to Block’s strong buy rating and magnifying its attractive P/E valuation is that over the last 60 days, FY26 and FY27 EPS estimates have risen over 14% respectively, from projections of $3.22 and $4.23.

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Providing a more comprehensive view of a company’s valuation by factoring in its earnings growth potential, Block has a PEG ratio of 0.6X (P/E divided by expected EPS growth rate).

Conventional wisdom says that a PEG ratio of 1 or less is considered good (at par or undervalued to its growth rate), and Block is well under that threshold, with its industry average at over 2X and the S&P 500 at 1.3X.  

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Block stock also trades under the preferred level of less than 2X forward sales, with most of its internet-software peers above this level, as well as the S&P 500.

Furthermore, Block's annual sales are projected to increase over 11% in FY26 and FY27, with projections heading toward $30 billion after bringing in $24.19 billion in 2025.

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Summary

Block’s rebound is being driven by AI-powered restructuring, new product innovation, expanding enterprise partnerships, and strong Cash App momentum, all of which suggest improving fundamentals and strong future growth potential.

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This article originally published on Zacks Investment Research (zacks.com).

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