What happened
These days, it's sometimes hard to remember that fintech Block (SQ 0.91%) was once a high-flying investor darling. On Wednesday, the beaten-down company's shares suffered a fresh body blow, declining by over 7% following their inclusion on a naughty list compiled by a researcher.
So what
Before market open, Evercore ISI analyst David Togut not only reiterated his underperform (i.e., sell) recommendation and $49 per share price target on Block stock, he added it to his company's "tactical underperform" list. He enumerated no less than seven reasons for investors to rid themselves of the shares.
Chiefly among these, Togut is concerned with "persistent headwinds" from competition in the retail financial services space, declining economic growth, and a more cautious lending regime at the fintech company's buy now, pay later unit Afterpay.
Togut's estimates for Block's second half of 2022 are broadly in line with those of other analysts tracking the company. However, he's generally more bearish than his peers on 2023 gross profit and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). His estimates for those two metrics are roughly 4% and 10%, respectively, below consensus.
NYSE: SQ
Key Data Points
Now what
Rather inconveniently, Togut's placing Block on the tactical underperform list came less than 24 hours before the company's third-quarter earnings were scheduled to be unveiled. The company is slated to effect this in a conference call after market hours on Thursday.
It's quite possible that the bearish opinion of analysts like Togut will be validated, at least as far as eroding profitability is concerned. On average, the prognosticators following Block stock are modeling a per-share earnings decline of nearly 38% over the year-ago third quarter (to $0.23 per share). The outlook is different for revenue, which is anticipated to see a healthy 17% increase to just under $4.5 billion.
