Block May Look Cheap, but I'm Not Buying
Fintech as a sector hasn't fared well in 2022. Cathie Wood's Ark Invest Fintech Innovation ETF, for example, is down 62% in 2022. Fintech isn't limited to unprofitable tech stocks in the financial industry; companies such as Visa and American Express have strong fintech elements, and their stocks are beating the market this year.
But the unprofitable tech stocks are pulling the sector down. Block (NYSE: SQ), once a high-flying growth stock with an astronomical valuation, is down 59% in 2022. Its valuation has dropped from more than 15 times trailing-12-month sales to only 2, which is quite cheap for a growth stock. But I wouldn't buy Block stock right now.
Block powers digital financial transactions for two separate businesses. The first is Square, what used to be its eponymous business, which is focused on merchant transactions. Square sells both hardware, such as Square terminals, as well as financial solutions such as digital credit card processing. It has expanded its services and created a full ecosystem to help merchants runs their businesses. Square sales increased 27% year over year in the third quarter, with a 29% increase in gross profit.
Source Fool.com
