This Fintech Was Just Added To The S&P 500 And Shares Are Soaring
Block (NYSE:XYZ), the financial technology (fintech) firm, reached a key step in its development this week as it will be added to the S&P 500.
Block announced last Friday that it will officially join the S&P 500 on Wednesday, July 23, replacing Hess, the oil and gas company that was recently acquired by Chevron (NYSE:CVX).
“It’s a milestone that reflects the strength of our business and the work of thousands of people building tools to increase access to the economy, across our brands including Square, Cash App, Afterpay, TIDAL, Proto, and Bitkey,” Block officials said in a statement. “Thanks to our customers, teams, and shareholders who’ve been with us on the journey. We’re just getting started.”
Block used to be known as Square, which is the company’s point-of-sale platform that allows merchants to accept credit card payments. It also owns the Cash App, which allows users to send and receive money, as well as Afterpay, a buy now, pay later (BNPL) service. In addition, Block owns a bank charter, so it can offer loans, deposits and other financial services to its customers that use Square and its other products.
The S&P 500 boost
Inclusion in the S&P 500 is important for several reasons. Among them, it signals that a company has grown to the point that it has reached large cap status. Currently, Block has a market cap of almost $50 billion.
But more importantly, it increases the exposure of a stock among investors. Specifically, being part of the S&P 500 means the stock will be included in more exchange-traded funds (ETFs) and mutual funds that track large cap stocks, like the SPDR S&P 500 ETF (NYSEARCA:SPY) and the Vanguard S&P 500 ETF (NYSEARCA:VOO), two of the largest ETFs in the world.
So not only will more retail investors be investing in Block through these funds, but it will also be included in massive institutional separate accounts that track the S&P 500.
Block gets price target upgrades
Block has been on a wild ride over the past few years. During the post-COVID technology boom of 2020 and 2021, Block stock soared to almost $280 per share in July of 2021 before falling in the crash that followed in late 2021 and 2022. It kept declining until mid-2023 when the deposit crisis rocked banks. Block stock sank to below $40 per share.
Since then, the stock has steadily climbed back up to its current $78 per share – still far below its 2021 peak.
Even with Monday’s 8% gain and a 13% spike over the past two trading days, Block stock is still down 9% year-to-date. Its up 15% over the past year, but it is down about 9% on an average annualized basis over the past five years.
Wall Street analysts have set a median price target of $75 per share for block, which is down about 5% from its current price.
However, it got some key raises on Monday, as JPMorgan raised its target by $30 to $90 per share on the S&P 500 news, saying it adds more “positive energy” to the shares and should drive demand. Also, Baird boosted its target by $8 to $84 per share.
Block has been consistently profitable over the past year or so, and it is still fairly cheap, trading at 17 times earnings. It could got on a little run here, up to when it reports Q2 earnings on August 7.
This post originally appeared at ValueWalk.
Category: Dividend Stocks
