Block (XYZ) has been back in the headlines after Cash App’s new NFC accessory, the Magic Wand, sold out quickly. This has spotlighted fresh payment formats alongside Square’s ongoing push to support merchants and franchises.

Despite the Magic Wand sell out and new client wins such as Magnolia Soap & Bath Co. and Baker St Cafe, momentum has cooled recently. The share price is down 10% over 7 days but shows a 4.60% year to date share price return and a 4.86% 1 year total shareholder return, while the 5 year total shareholder return remains down 68.93%.

If this kind of payment and commerce shift has your attention, it is a good time to widen the search and look at 63 profitable AI stocks that aren't just burning cash

With Block trading at US$68.15, showing mixed recent returns and a 5 year total shareholder return that is still down sharply, the key question is whether current prices offer upside potential or whether the market is already pricing in expectations for future growth.

Most Popular Narrative: 25% Undervalued

At a last close of $68.15 versus a narrative fair value of $90.52, the current price sits well below what this widely followed framework implies. This puts the focus squarely on how future earnings and margins might develop.

The scaling and innovation within Square for Businesses highlighted by the launch of new hardware like Square Handheld, adoption of omnichannel commerce tools, and growing field/telesales teams positions Block to further capture share from the global trend toward digitalization and consolidation of small business commerce, supporting topline growth and eventual margin expansion as the business scales internationally. Aggressive investments in international expansion (25% YoY GPV growth in international markets) and upmarket sales motions (rapid ramp in field/telesales, strong ROI and payback periods) increase the platform's total addressable market, diversify revenue streams, and create long-term compounding effects on both revenue and operating income, as new customer cohorts and markets mature.

Curious what has to happen for that higher fair value to make sense? The narrative leans on stronger earnings, firmer margins, and a richer future earnings multiple. The exact mix of growth, profitability and discount rate assumptions might surprise you.

Result: Fair Value of $90.52 (UNDERVALUED)

However, this hinges on Cash App sustaining high engagement and on crypto related revenues remaining dependable, both areas in which regulation and competition could easily shift sentiment.

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Another Angle On Block’s Valuation

The narrative fair value suggests Block is undervalued at $68.15, yet its current P/E of 50.7x is well above the US Diversified Financial industry at 16.4x, peers at 10.9x, and even the 27.3x fair ratio. That gap points to real valuation risk if expectations reset.

Before leaning too hard on any one story, it helps to see how the earnings multiple compares in more detail. This includes where the ratio could drift if sentiment cools or improves, and how that stacks up against similar stocks, See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

If the mixed signals so far leave you undecided, this is the moment to move quickly. Review the underlying metrics yourself, and weigh both sides of the story with 3 key rewards and 1 important warning sign

Looking for more investment ideas?

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• Hunt for potential bargains using the 49 high quality undervalued stocks to see which stocks currently trade below their assessed worth on quality and cash flow metrics.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.