Block investors need more to gauge crypto unit’s earnings potential, analysts say

J.P. Morgan estimates the deal could fetch $225 million to $300 million for Block, but said it will need more information to evaluate the hardware business’s long-term earnings potential.

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

Almost 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 Core Scientific deal) is further evidence of Block as an emerging leader in the crypto 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 the analysts.

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

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

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