$7.60 for a cup of coffee? The ASX stock cashing in on this craziness

Are coffees so expensive now because of inflation? One expert broke down the figures to try to explain her morning extortion.

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A retail payment terminal displaying the following: $7.60, Tap, Insert or Swipe.

Square terminal made by Block. Source: Jessica Amir

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Australians love their coffee, but it was all a bit too much for Moomoo market strategist Jessica Amir this week.

"This morning I paid $7.60 for a large coffee," she said.

"What's behind the crazy price for a cup of takeaway coffee?"

Surely inflation can't be that bad, can it?

She broke down the ingredients and tracked the global prices for each commodity.

"Coffee bean prices have fallen 18%. Average milk prices have fallen 10% to 23%. Oil prices — think transport — have fallen 1.4%.

"The Australian wage cost index is up 39%. Australian rent is up 390% annually — all in two years."

There's no obvious answer. Wages and real estate are up but the coffee components are actually cheaper than they used to be.

Then a thought hit her like lightning.

"The real winner when you splurge on your takeaway coffee? The payment terminal, Square."

What is Square and who makes it?

Square is a payment terminal that allows customers to pay using credit and debit cards at a retailer.

The US maker of the devices is dual-listed on the NYSE and the ASX — Block Inc CDI (ASX: SQ2).

Amir points out the share price has had a shocker in recent times.

"Over the last two years, its share price has fallen 79%," she said.

"Also note — stay with me here — that Square makes 40% of its money from Bitcoin (CRYPTO: BTC). And the Bitcoin price has fallen by 44% in two years."

So considering the payment terminal's ubiquity and its ability to take a commission from each $7.60 cup of coffee we buy, are Block shares the bargain of the century?

Are Block shares worth buying right now?

According to Amir, the latest financials were bullish.

"Block had a positive third-quarter earnings report showing higher net revenue growth, higher earnings per share, earnings (EBITDA) and higher transaction-based revenue.

"Block also upgraded its guidance and expects long-term growth ahead."

Therefore, Amir would buy Block shares to offset the exorbitant cost of her morning caffeine hit.

"Now might just be the best time to buy into the dip before it skyrockets," she said.

"Consensus price target is US$72.79 ($112.71) with 71% of [Wall] Street analysts holding the stock as a buy."

Block shares closed Tuesday at $76.89 apiece.

Motley Fool contributor Tony Yoo has positions in Block. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Block. The Motley Fool Australia has positions in and has recommended Block. 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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