With a market cap of $36.2 billion, Block (XYZ), formerly known as Square, has been a major player in the fintech industry, providing a variety of services via its Square and Cash App platforms. The Square Ecosystem targets businesses, whereas the Cash App Ecosystem targets consumers, resulting in a two-pronged fintech platform. This dual-segment model enables Block to create an interconnected financial experience.

While the Square ecosystem performed well in the first quarter of 2025, the Cash App business faced near-term challenges due to changing consumer spending habits. Block stock is down 32.7% year-to-date, compared to the broader market's gain of 0.57%. Let’s find out if this is a good opportunity to buy Block stock on the dip.

Cash App Faces Near-Term Headwinds

2025 has started off on a challenging note for the company, marked by economic uncertainties, evolving consumer behaviors, and competitive pressures. In the first quarter, Block's adjusted earnings per share declined 19.1% year-over-year to $0.56, below analyst expectations of $0.93. Revenue for the quarter came in at $5.7 billion, missing the anticipated $6.17 billion, and down from $5.9 billion in the year-ago quarter. 

Block operates in two primary business segments. The Square Ecosystem focuses on offering tools and services to businesses, particularly small and medium-sized enterprises (SMEs). Meanwhile, Cash App began as a peer-to-peer payment platform and has grown into a robust consumer financial services ecosystem that caters to individual users with simple, mobile-first experiences.  In the first quarter, Cash App's gross profit increased by 10% year on year. However, management stated that the results were below expectations due to lower consumer inflows and discretionary spending in categories such as travel and media. 

On the other hand, Square led the charge with a 9% year-over-year increase in gross profit, which was supported by a 7.2% increase in gross payment volume (GPV). Banking products and software, as well as integrated payments, contributed significantly to the strong performance. To increase user engagement and monetization, the company has prioritized expanding its product offerings, particularly within the Cash App ecosystem. Initiatives include improving banking features and integrating Afterpay services. 

During the Q1 earnings call, CFO and COO Amrita Ahuja stated that Block achieved its highest-ever adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $813 million. Total gross profit increased 9% year on year to $2.29 billion. Free cash flow over the trailing 12 months reached $1.53 billion. Block has already repurchased $600 million in stock in 2025, with additional purchases planned.

The company has a few other ecosystems. TIDAL is a global music and fan platform that it acquired in 2021, while Afterpay is a BNPL service that it acquired in 2022. The company offers Bitkey, a self-custody wallet, as well as a suite of Bitcoin mining products and services known as Proto. Bitcoin (BTCUSD) generated $2.3 billion in revenue in the first quarter, a 15.7% decline. Block expects to ship its first Bitcoin mining chips and systems in the second half of the year, introducing another growth opportunity.

Despite the Q1 results, Block remains confident in Cash App's long-term prospects. Management cited non-discretionary spending resilience and upcoming growth catalysts to boost the segment. Block anticipates that growth will re-accelerate in the second half of 2025. It expects total gross profit to increase 12% year on year to $9.96 billion, with momentum building each quarter, from 9.5% growth in Q2 to mid-teens growth in Q4. The company now expects adjusted operating income of $1.9 billion for the full year, representing a healthy 19% margin. 

Analysts covering the stock predict a 3.8% increase in revenue in 2025, alongside a 15.1% decrease in earnings. However, earnings are expected to rebound by 39.9% by 2026. Block is currently trading at 14 times forward earnings, which is reasonable. 

What is Wall Street’s View on XYZ Stock?

On Wall Street, Block stock has been downgraded to a “Moderate Buy” from its “Strong Buy” rating a month ago. Out of the 39 analysts covering XYZ, 24 have a “Strong Buy” recommendation, four say it's a “Moderate Buy,” nine rate it a "Hold,” and two suggest a “Strong Sell.”

The analysts' average price target of $67.72 implies potential upside of about 19.2% from current levels. Its Street-high price target of $100 suggests an upside of 76% in the next 12 months.

The Bottom Line on Block Stock

While the 32% drop represents a good buying opportunity, Block's core business appears to be struggling for the time being due to the intense competition in the fintech space. Management appears confident in the path forward, stating, "We understand the drivers of recent deceleration, and we are investing wisely to support sustainable long-term growth." However, profitability has been inconsistent in recent quarters. Risk-averse investors may find better fintech stocks to put their money in.