Why Does Block Trade At A Discount?

Hello, Fintech Friends!

During its most recent ‘On The Block’ conversation aired August 14, the CFO of Block*, Amrita Ahuja, was posed the following question: “What do you think Block hasn’t done well enough…to earn a sustained re-rating on the stock?”

For shareholders, the persistent discount between Block and its closest peers may be among the most frustrating aspects of the story, especially considering the perception that Block’s execution has improved and growth is moving to a sustainably higher level. Before I attempt to hypothesize why the discount exists, let’s take a closer look at the numbers first.

On an expected calendar 2026 gross profit of $12.51 billion, Block’s enterprise value of approximately $50 billion represents 4.0x gross profit. On a similar measure and based off of consensus estimates (per Koyfin), Chime trades at 5.6x, Affirm at 11.5x, and Toast at 9.5x. Big premiums certainly. From a growth perspective, Block is expected to increase gross profit by 21% during calendar 2026, Chime by 27%, Affirm by 29%, and Toast by 23%. Yes, growth for peers is expected to be faster, but not materially so. Now, on to the why.

The first, and potentially most obvious reason Block trades at a discount is because Block is an amalgamation of three separately scaled businesses: a P2P and digital banking app (Cash App), an integrated operating platform for SMBs (Square), and a global BNPL provider (Afterpay). If a conglomerate discount exists in fintech, Block has certainly been saddled with one. Now, in their defense, traditional conglomerates happen primarily through M&A. In the case of Block, with the exception of Afterpay, the vast majority of their products have been internally developed, invested behind, and scaled.

Other potential factors for the discount include Block’s credit exposure and lack of transparency.

On credit, based on my estimates, I believe approximately one-third of Block’s gross profit comes from lending-based activities, including Square capital, BNPL, and Cash App Borrow. Even though that may seem high, the credit contribution for Toast and Chime is approximately 10% and 20%, respectively. Further, Affirm generates nearly all of their gross profit from lending, including a significant amount from longer-duration, higher-interest installment loans.

Finally, where I believe Block can do better is transparency. Where Chime, Affirm and Toast provide a thorough accounting of their key products’ performance, including volume, revenue, and loss rates, Block offers incomplete and shifting disclosures that make assessing underlying performance a bit of a guessing game from quarter-to-quarter.

Block’s ability to close its valuation gap will be one of the more interesting stories to watch over time, in my opinion. While I believe there are actions they could take to help themselves, there does not appear to be a single ‘silver bullet’ outside of sustained execution, which is likely to be measured in years, not quarters.

* As of August 26, 2026, I am long Block

Bob Hammel

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Charts Corner

Data source: Yahoo Finance

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