the to block– Aktie (WKN: A143D6) is in my portfolio. She will stay there. But I probably won’t repurchase the shares at this time. There is a good reason for this.
In the end we are already on the subject. The reason the block stock is trading so low is the same reason I’m not buying anymore. It’s the Bitcoin or the attitude of senior management towards this cryptocurrency. This in turn leads to risk on several levels.
Bitcoin: the reason the block stock is so low?
Investors should be aware that Bitcoin is part of Block’s investment thesis. It’s not just the Cash app that gives consumers access to cryptocurrency. No, but commitment is more complex than this first superficial glimpse.
The management of the payment service provider has invested around US$200 million in Bitcoin in the past. These investments are not working so well right now. They also tie up capital and lead to balance sheet and asset volatility. This is a problem for me. But the strategic shift also shows that things must continue in this direction.
Block works on cryptocurrency development in both Spiral and TBD divisions. Probably also because of what the asset may mean for your own growth story. So there is a strategic commitment to Bitcoin.
This has not necessarily been lucrative for the block stock in the past. By the way, it currently has a market cap of $36.7 billion and a price-to-sales ratio below 4 (even if we exclude Afterpay). That tells me the market is approaching this growth story with a healthy dose of skepticism.
In fact an intact thesis
In the case of Block stock, the investment thesis is actually intact for me. The market for digital payment services is lucrative. The management builds a good ecosystem and has the two crucial sides in mind. Private customers and at the same time resellers and sellers, for whom simple solutions for payment processing are made possible. Revenue growth was recently 25% year-over-year, excluding Afterpay, with revenue of $2.54 billion. Additionally, gross profit rose 38% to $1.57 billion. This all sounds great, Afterpay is probably a factor where there are net losses again.
However, it is bitcoin that causes me a wound in the investment thesis and, last but not least, a certain risk. Maybe even for the salt due to the poor performance, which is now additionally thrown into this wound.
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Vincent owns shares in Block. The Motley Fool owns stocks and recommends Bitcoin and Block.