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Why Afterpay owner Block shares are looking undervalued

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Block Inc (ASX: XYZ) shares closed on Monday trading for $97.65 apiece.

This sees shares in the S&P/ASX 200 Index (ASX: XJO) buy now, pay later (BNPL) company, which acquired Afterpay in January 2022, up 11.42% over 12 months.

That’s more than four times the 2.6% one-year gains delivered by the ASX 200.

And according to Andrew Dale, a partner and portfolio manager at ECP Asset Management, the BNPL giant still looks to be trading for a bargain (courtesy of The Australian Financial Review).

Should you buy Block shares today?

Asked which stock his fund holds that he believes is the most undervalued by the market, Dale pointed to Block shares.

According to Dale:

We believe Block – a financial technology company which owns Afterpay – is underappreciated and is a top position in the fund. In its most recent update, it demonstrated progress on its operational efficiency initiatives.

And unlike many tech focused company’s, Dale said that artificial intelligence systems are supporting the stock’s performance.

“The sustained focus on cost discipline and the deployment of AI-enhanced productivity tools supported margin expansion across both the Cash App and Square business units,” he noted.

Summarising his bullish outlook on Block shares, Dale concluded:

With the company executing towards its upgraded guidance and maintaining steady growth in gross sales, its medium-term earnings trajectory and improving product launch velocity paints a bullish picture.

What’s the latest from the ASX 200 BNPL stock?

Block reported its first-quarter (Q1 2026) results on 8 May.

Highlights include net quarterly revenue of US$6.06 billion, with the company achieving a gross profit of US$2.91 billion, up 27% from Q1 2025.

However, impacted by US$852 million in restructuring and legal costs, Block reported a Q1 operating loss of US$172 million.

Following the strong first-quarter performance, the company increased its full calendar year 2026 gross profit guidance to US$12.33 billion, up 19% from 2015. Block expects to achieve a full-year adjusted operating income margin of 27%.

As for the AI-enhanced productivity tools that Dale mentioned above, Block CEO Jack Dorsey said, “We continued to deliver strong financial performance in the first quarter as AI became more central to how Block operates and what we build for customers.”

Dorsey noted:

Our roadmap is differentiated because it connects AI directly to the financial decisions customers and sellers already make every day. Internally, AI is helping us move faster and improve quality. Externally, it is helping us build products that act earlier for customers and sellers.

Block shares closed up 4.8% on the day of the results release.

The post Why Afterpay owner Block shares are looking undervalued appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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