It has been over a week since Block Inc (ASX: SQ2) released its second quarter results for FY22. During this time, Zip Co Ltd (ASX: ZIP) shares have slipped 2% after what has been a thunderous 150% resurgence from 1 July.
While Block's metrics were mostly in line with expectations, the earnings call included some rather optimistic remarks from management regarding the company.
Instead of flaunting growth in its gross payment volume (GPV) or its 47 million transaction Cash App accounts, Block's chair and co-founder, Jack Dorsey, highlighted its unique value proposition.
More than instalments
As The Motley Fool reported previously, Zip delivered higher growth than its formerly ASX-listed foe, Afterpay, in the most recent quarter.
Afterpay, owned by United States fintech company Block, experienced a 13% uptick in total transactions via the platform — reaching US$5.3 billion. However, Larry Diamond-led Zip delivered a 20% improvement to $2.2 billion compared to the prior corresponding period. In turn, Zip shares soared 16% on the positive news.
Yet, Dorsey's impassioned belief in Block remained intact during the company's earnings call. In response to a question regarding retention and future growth, Dorsey said:
In terms of retention and also new customer acquisition, it really has to do with how much utility we're offering… that we're not just focused on one thing such as peer-to-peer transactions, or investing, or Bitcoin, or lending; but it is one place where you can do all those things.
In fact, the co-founder goes as far as to describe its offering diversity as Block's 'superpower', stating:
More importantly, the fact that we have both of those [Cash App ecosystem and Square ecosystem] in one company, we believe is our superpower. So, over the long term, we will continue to see a bunch of ebbs and flows within the markets and macro environments. But our strength relies on the fact that we're not just dependent upon one particular use case — one particular utility — but that we offer all of them. While one may ebb the other will flow. We will continue to build this ecosystem where someone's coming back to CashApp every single day for something that is of extreme importance in their life.
What does it mean for Zip shares?
In contrast to Block, Zip has squarely set its sights on the buy now, pay later market. Even more so following news of the company's Operation Blue Sky, which aims to remove excess expenses.
As part of Operation Blue Sky, Zip is believed to be hitting pause on other ambitious forays into finance. This includes Zip's previously touted planned entry into crypto. Interestingly, Bitcoin revenue was responsible for around 40% of Block's revenue in the second quarter.
However, whether Zip's narrow focus will prove to be a strength or cause strife will only become apparent with time.
Despite Zip Co's recent rally, Block shares have been the outperformer over the last six months. During this time, Zip has fallen 55% while Block is down 21%.
