KEY POINTS

  • An analyst reiterated his sell rating on the fintech firm
  • The same analyst also listed Block as a “tactical underperform”

What’s going on with Block stock

Block (NYSE:SQ) was once a highly-regarded fintech company, but recently, Block stock took a dive. On Wednesday, the company’s shares took a hit, declining by over 7% after being included in a researcher’s “bad books.”

Why we care

David Togut, an analyst with Evercore ISI, reiterated his underperform rating and $49 per share price target for Block stock. In addition, he cited seven reasons investors should sell the shares and added Block to his company’s “tactical underperform” list.

Among his many concerns, Togut is most worried about “persistent headwinds” from competition in the retail financial services sector. He also stated problems with declining economic growth and a more cautious lending regime at Afterpay (Block’s buy now, pay later unit.)

Togut’s estimates for Block’s second half of 2022 are consistent with those of other analysts tracking the company. However, he is more bearish than his colleagues regarding gross profit and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2023. Togut’s estimate is approximately 4% and 10% below consensus for these metrics, respectively.

What now

Togut decided to place Block on the tactical underperform list less than 24 hours before the company scheduled the reveal of its third-quarter earnings. The company will effect this change in a Thursday conference call after market hours.

Analysts like Togut are bearish on Block stock, and it’s possible that the stock will validate their opinion as profitability starts to erode. On average, the analysts following Block stock predict that per-share earnings will decline by 38% over the year-ago third quarter (to $0.23 per share). However, they expect revenue to increase by 17% to just under $4.5 billion.

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