5 Web 3.0 Stocks to Buy and Hold for Long Term

4. Block, Inc. (NYSE:SQ)

Number of Hedge Fund Holders: 96    

Block, Inc. (NYSE:SQ) provides payments solutions. Block has been one of the earliest cheerleaders of blockchain technology in the payments universe. This has allowed the company to position itself for the advent of Web 3.0 as it has already integrated blockchain tech into the Block platform. 

Block, Inc. (NYSE:SQ) remains a top payments stock on Wall Street despite a broader lull around growth stocks. At the end of the fourth quarter of 2021, 96 hedge funds in the database of Insider Monkey held stakes worth $5.9 billion in Block, Inc. (NYSE:SQ), compared to 98 in the preceding quarter worth $8.8 billion. 

In its Q1 2021 investor letter, RiverPark Funds, an asset management firm, highlighted a few stocks and Block, Inc. (NYSE:SQ) was one of them. Here is what the fund said:

“We established a position in leading Financial Technology provider Block, Inc. (NYSE:SQ) during the quarter. Through one integrated system, Block, Inc. (NYSE:SQ) is a hybrid of two businesses: its Seller Business (charging small and medium-sized businesses about 3% for transaction payment processing, plus other services such as instant funds access, and software for everything from customer engagement to payroll), and its Cash App (originally for person-to-person cash transfers and now a growing digital financial services provider for consumers).

The combined business has grown gross profit at a 37% CAGR over the past five years to $2.7 billion (due to pass through costs, gross profit is more reflective of top-line growth) and we believe that Block, Inc. (NYSE:SQ) has an enormous long-term runway, as it has less than a 2% share of a more than $160 billion market. It is our view that the company’s Cash App (which has grown from nothing in 2015 to $1.2 billion gross profit last year) has a particularly large opportunity with its powerful ecosystem of digital financial services including digital wallets, direct deposits, stock trading, bitcoin trading, and business and tax services, which are all relatively new. The vast majority of Cash App’s more than 36 million users are younger and, importantly, are willing to replace their bank and other financial services accounts with the app.

We estimate that Block, Inc. (NYSE:SQ) can grow its gross profit more than 30% and EBITDA more than 50% annually for the foreseeable future, and while most of the company’s current profit is from its Seller Business, we believe most of the company’s future value will be from its Cash App business.”