Block traders need more to assess crypto unit’s earnings potential, analysts say

July 11 (Reuters) – Jack Dorsey-led payments technology company Block (SQ.N)New tab, opens a new tab could become a formidable player in the cryptocurrency mining industry, but Wall Street will need details on profit margins to assess the favorable earnings from this business, analysts said.Block inkedNew tab, opens a new tab its first large-scale crypto mining hardware deal on Wednesday, agreeing to supply its chips to bitcoin miner Core Scientific (CORZ.O)New tab, open new tabbut no financial details were released.

JP Morgan estimates the deal could yield $225 million to $300 million for Block, but said it would need more information to assess the hardware business’s long-term earnings potential.

“We have more to learn in terms of margins on this business, so we are hesitant to underwrite this until we learn more about cadence and economics,” JP Morgan said.

The deal represents a major step for the payments company, which started as “Square” in 2009 before Reformulation in 2021 in a nod to his focus on crypto and blockchain technologies. Dorsey, who co-founded and led Twitter (now known as ‘X’), has long been bullish on bitcoin. Block started investingNew tab, opens new tab 10% of your monthly gross profit from bitcoin products in bitcoin in April.

Nearly 9% of the company’s cash, cash equivalents and marketable securities were held in the form of bitcoin in the first quarter.

“This development (the deal with Core Scientific) is further evidence of Block as an emerging leader in the cryptocurrency hardware ecosystem,” Macquarie analysts Paul Golding and Emma Liang wrote in a note.

Subsequent similar deals could further validate Block’s reputation in the industry, according to analysts.

But JP Morgan said the stock’s performance will be determined by Block’s other segments, such as Square and Cash App.

Block shares have lost nearly 17% so far this year.

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Reporting by Niket Nishant in Bengaluru; Editing by Shreya Biswas

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Niket Nishant reports on the latest news and quarterly earnings from Wall Street’s biggest banks, card companies, fintech startups, and asset managers. He also covers the biggest IPOs on US exchanges and late-stage venture capital funding, along with news and regulatory developments in the cryptocurrency industry. His writing appears in the website’s finance, business, markets, and future of money sections. He did his postgraduate studies at the Indian Institute of Journalism and New Media (IIJNM) in Bengaluru.

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