What happened
Block (SQ 2.14%) was dropping on Wednesday as the stock price fell as much as 6.4% at 11 a.m. ET. By 3:35 p.m. ET, it was still trading about 6.3% lower, at $68.76 per share.
It was a down day overall on Wall Street, as all the major indexes were moving lower, led by the Nasdaq Composite Index, which was off about 1.6%.
So what
Block actually had some good news on Wednesday, as another economic indicator beat expectations. Retail and food services sales were up 1.3% in October compared to the previous month and 8.3% compared to October 2021, according to the Census Bureau. That increase was better than the 1% one economists expected.
Retail trade sales were up 1.2% for the month and 7.5% year over year, while gas station sales were up 17.8% and restaurants were up 14.1% year over year.
NYSE: SQ
Key Data Points
Combined with lower inflation numbers and rising gross domestic product (GDP) in the third quarter, these are all good signs for Block, a payment company that relies on consumer spending for its Cash App and Square merchant services products to generate revenue.
In addition, Block announced Wednesday that it was launching a new Square credit card for its merchants and small business owners with American Express. It is the first credit card Square will offer to its sellers and will be integrated directly with Square's broader ecosystem of services and solutions.
And there was more good news, as analyst Dan Dolev of Mizuho raised Block's price target to $69 from $57. It is currently trading at $68, so it would be essentially flat. Dolev cited a projected boost in revenue from its small-dollar Cash App Borrow lending product, among other factors.
So why was the stock down?
Now what
It seems as if this bit of positive news was offset by a subpar third-quarter earnings report by retail bellwether Target. Target missed analysts' estimates as sales were impacted by high inflation numbers in the quarter. Also, Target did not have a great outlook for the fourth quarter, expecting a low-single-digit decline in comparable sales based on "softening sales and profit trends that emerged late in the third quarter and persisted into November," the company said in a press release.
This seemed to bring the market down, including Block. But then Walmart had strong third-quarter earnings, which it released Tuesday.
As for Block, the fintech remains a stock that seems overpriced, with a forward price-to-earnings (P/E) ratio of 45 and too much economic uncertainty to back right now.
