Shares of Block (NYSE: XYZ) are falling on Friday. The stock dropped 20.7% as of 12:55 p.m. ET and was down as much as 24.3% earlier in the day. The move comes as the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) gained 1.5% and 1.8%, respectively.
A big miss for Block
Block reported its Q1 2025 numbers yesterday, underperforming across the board. Revenue for the quarter was down 3% year over year (YOY), coming in at $5.77 billion when $6.2 billion was expected. While its earnings per share (EPS) were up 19% YOY to $0.56, Wall Street had expected $0.97 per share.
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The company lowered its guidance as well. The company expects a Q2 gross profit of $2.45 billion and $9.96 billion for the full year. Analysts were expecting $2.54 billion and $10.2 billion, respectively. The company cited a soft macro environment, weak consumer spending, and lower inflows during what is usually a strong tax refund season for its weaker-than-expected numbers.
Image source: Getty Images.
Cash App is struggling
At the heart of Block’s growth potential is Cash App, a competitor of Venmo from PayPal. While Cash App’s gross profit did inch up 10% YOY to $1.38 billion, it fell short of expectations and was half the growth Venmo delivered.
Not the time to buy
Despite the 20% haircut today, I don’t think Block is a good bet at the moment. The report reveals a struggling business whose core growth product is stagnant and failing to keep pace with the competition.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Block and PayPal. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short June 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy.
