What happened
Shares of Block (SQ 0.51%) were trading more than 5.6% lower at 11:11 a.m. ET today after an analyst downgraded the stock significantly this morning.
So what
Mizuho analyst Dan Dolev downgraded Block from a buy rating to neutral and dropped his price target on the company from $125 to $57, which pretty much means Block is fully priced in, according to Dolev, with shares trading at more than $56.
Dolev said he is not so bullish on Block's growth right now due to "user fatigue, plateauing inflows, [and] loss of the best-of-breed" point-of-sale company. Dolev also called Block's buy now, pay later efforts lacking due to "misexecution."
Dolev said in a note that Block "still has enormous potential, but it is not being realized," which is why he no longer thinks the company deserves as high a price target and valuation.
Block's stock has struggled enormously this year and is down more than 65%. In its most recent quarterly earnings report, Block reported a net loss of about $208 million, which is in stark contrast to the $204 million profit it reported in the second quarter of 2021. Gross payment volume grew almost $10 billion from the year prior but came in below what analysts had been expecting.
Now what
Block has undoubtedly run into some hiccups this year, like a lot of large fintech companies, and may face more pressure in the near term if there is a more severe recession.
But the company has achieved significant scale, and, as Dolev mentioned, it is still well positioned for the future. I think it's still a good long-term buy.
