We recently published a list of 7 Most Undervalued Blockchain Stocks to Buy According to Analysts. In this article, we’ll take a look at where Block Inc. (NYSE:SQ) stacks up against the other most undervalued blockchain stocks to buy according to analysts.
Transforming finance: the impact of Blockchain technology
The blockchain industry is witnessing significant trends that are shaping its future and expanding its use cases across various sectors. One of the most notable trends is the growth of decentralized finance (DeFi), which is transforming traditional financial systems by providing peer-to-peer financial services on public blockchains without intermediaries.
Established financial institutions are increasingly adopting blockchain technology to improve transparency and efficiency. According to a report by The Business Research Company, the global blockchain in banking and financial services market was valued at $4.61 billion in 2023. The market is expected to grow significantly at a compound annual growth rate (CAGR ) by 40.4% in 2024. 2028 to reach a value of $27.69 billion by the end of the forecast period.
According to the 2024 Crypto Geography Report from Chainalysis, an American blockchain analysis company, global cryptocurrency activity is on the rise. Between Q4 2023 and Q1 2024, the total value of global crypto activity increased significantly to surpass the levels seen in 2021 during the crypto bull market.
In January 2024, the United States Securities and Exchange Commission (SEC) approved the first spot Bitcoin exchange-traded fund (ETF), marking a significant milestone for the cryptocurrency market. This approval has led to an increase in Bitcoin activity across all regions, particularly in institutional-sized transfers and in regions with higher income countries like North America and Western Europe. At the same time, stablecoin usage has seen higher growth among retail and business transfers, particularly in low-income areas such as sub-Saharan Africa and Latin America. The Cryptocurrency Geography report also shows that DeFi services have seen substantial year-over-year growth, especially in regions like Sub-Saharan Africa, Latin America and Europe. ‘East.
Crypto investing is becoming more mainstream and institutionalized with Bitcoin ETFs. However, blockchain technology and tokenization can also disrupt the traditional ETF model. On September 28, CNBC reported that Janus Henderson, a leading global asset management group, announced a partnership with Anemoy Limited and Centrifuge to launch the Anemoy Liquid Treasury Fund (LTF), a tokenized fund that offers investors direct access to short-term US securities. Treasury bills. Nick Cherney, head of innovation at Janus Henderson, highlighted that this development represents an evolution in providing investment services to clients more efficiently rather than a threat to the ETF industry.
This new fund will retain the typical characteristics of an ETF while allowing trading on a blockchain platform. This provides investors with benefits such as 24/7 trading, instant settlement and increased transparency regarding fund holdings, surpassing what traditional ETFs offer. Cherney said the company aims to be at the forefront of this opportunity, which reflects a broader trend to integrate 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 looked at our own rankings, sifted through ETFs, and consulted various online resources. From an initial pool of over 30 stocks involved in the blockchain space, we focused on those trading at less than 23 times their forecast earnings as of October 4. This helped us identify stocks that were cheaper than the S&P 500 Index, which has a forward P. /E from 23.6 to October 4 (according to the WSJ).
We’ve only included stocks that are estimated to have positive earnings growth this year. From this list, we have selected the 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 their average price target upside potential as of October 4, 2024.
Additionally, we mentioned hedge fund sentiment around each stock, which was taken from the Insider Monkey database of 912 elite hedge funds as of Q2 2024.
Why do we care what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the stocks selected by the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
People using the Cash app pay for goods and services, highlighting the impact of the company’s payment tools.
Bloc Inc. (NYSE:S.Q.)
Forward P/E: 14.41
Profit growth: 98.90%
Analyst upside potential: 34.29%
Number of hedge fund holders: 59
Block Inc. (NYSE:SQ), formerly known as Square, is a global technology company focused on financial services and heavily involved in the cryptocurrency space. The company changed its name in 2021 to reflect its growing interest in crypto and blockchain technologies.
The company offers a range 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 money in stocks or Bitcoin. Block Inc. (NYSE: SQ) supports the blockchain industry through its subsidiary TBD, which focuses on creating an open platform for accessing Bitcoin and other blockchain technologies. Through Spiral, the company is also building free, open source projects that advance the use of Bitcoin to build economic empowerment, furthering its commitment to the blockchain space.
The company’s business model meets diverse customer needs, from small businesses to individual users, creating multiple revenue streams. In addition to this, 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 provide advanced 3 nanometer (3nm) mining ASICs, which will improve mining operations of Bitcoin. The ASIC mining chip was built by Block’s Proto team. By integrating these new ASIC chips into Core Scientific’s infrastructure, the collaboration aims to decentralize Bitcoin mining and promote innovation within the industry, aligning with Block’s mission to democratize access to mining. Bitcoin mining technology. 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) could become a major player in the cryptocurrency mining sector.
In the second quarter of 2024, Block Inc. (NYSE:SQ) reported impressive financial results, with gross profit reaching $2.23 billion, a 20% year-over-year increase. Square generated $923 million in gross profit, up 15% year-over-year, while Cash App saw a more substantial increase of 23%, reaching $1.30 billion. This performance demonstrates the strength of Block’s diversified business model and its ability to adapt to market demands, particularly through Cash App, which has been a key revenue driver.
The company’s profitability indicators also showed remarkable improvement in the second quarter. Operating profit was reported at $307 million, with adjusted operating profit reaching $399 million. Notably, adjusted EBITDA nearly doubled year-over-year to $759 million, reflecting a significant increase in efficiency and effective cost management. For the fiscal year ended June, Block Inc. (NYSE:SQ) delivered adjusted free cash flow of $1.43 billion, more than double the prior year, indicating strong capabilities cash generation.
Block Inc. (NYSE:SQ) trades at just 14 times forward earnings. Analysts are also bullish on SQ. The 12-month median price target set by analysts indicates a potential upside of 34.29% from current levels.
As of the end of Q2 2024, Block Inc. (NYSE:SQ) was owned by 59 hedge funds. ARK Investment Management became the largest shareholder, with a stake valued at $534.78 million. SQ ranks among the top 5 on our list of the most undervalued blockchain stocks to buy according to analysts.
Overall QoS ranks 5th on our list of the most undervalued blockchain stocks to buy according to analysts. While we recognize the potential of SQ as an investment, our conviction lies in the belief that AI stocks hold more promise in terms of higher returns in a shorter time frame. If you’re looking for an AI stock that’s more promising than SQ but is trading at less than 5x earnings, check out our report on cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.
