Can SQ's Expanding Footprint in BNPL Domain Push the Stock Higher?

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Block’s SQ Afterpay division and strong partner base are boosting its prospects in the ‘Buy Now, Pay Later’ (BNPL) market. Its partnership with several brands, including Curology, Helzberg Diamonds, Journeys, Rawlings Sporting Goods, and Zenni Optical, is noteworthy.

Afterpay’s BNPL offering is now available to Alphabet’s GOOGL Google Play users. The expansion bodes well for the Afterpay division, on which Block estimates that consumers have spent more than $72 billion since its acquisition. 

Block leverages Afterpay to boost consumer engagement. Per SQ, consumer cohorts on the platform for over five years transact more than 31 times per year on average, compared with 4 times for those who joined in the past year.

On a trailing 12-month basis, Afterpay has driven 460 million leads to merchants and saw 138 million consumer visits. This is driving advertising revenue growth.

BNPL Gross Merchandise Volume (GMV) jumped 23% year over year to $8.24 billion, exiting third-quarter 2024. Growth was driven by strength in Block’s Pay-in-Four offering and Single Use Payments, which enables customers to BNPL at both in and out-of-network merchants from within the Afterpay app.

SQ Beats Sector & Industry, Rich Partner Base Aids Prospect

Block shares have gained 25.1% in the past month, outperforming the broader Zacks Business Services sector’s appreciation of 5.2% and the Zacks Technology Services industry’s return of 5.2%.

One-Month Performance

 

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Zacks Investment Research


Image Source: Zacks Investment Research

 

Block shares are trading above the 50-day and 200-day moving averages, indicating a bullish trend.

SQ Trades Above 50-day &200-day SMA

 

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Zacks Investment Research


Image Source: Zacks Investment Research

 

The strong prospect can be attributed to Block’s strong positioning in the digital payments industry on the back of its robust payment and point-of-sale (POS) solutions. Its rich partner base, including Wix, Restaurant365, and Intuit INTU, has been a key catalyst.

Block is expanding its footprint among beauty and wellness providers with new partner integrations, including SalonInteractive, Vish, Submatic, Pomp, SalconScale, and Glammatic. It inked a distribution partnership with SalonCentric to bring Square’s hardware and software offerings to more beauty professionals.

Block is investing aggressively in expanding its partner base, aiming to scale its distribution network. 

SQ’s Cash App and Lyft LYFT inked a partnership to bring a customer-friendly new payment method to the latter’s customers. Cash App’s partnership with Google Play offers a preferred alternative payment option when checking out on their Android smartphones or tablets.

This is driving transaction revenues. In the third quarter of 2024, Transaction (28.7% of net revenues) revenues were $1.71 billion, up 3.2% year over year. 

Strong Square ecosystem accounted for $1.61 billion in transaction revenues, up 7% year over year. Cash App contributed $99 million to transaction revenues, down 26% year over year.

In the reported quarter, Cash App Card actives grew 11% year over year to 24 million.

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