Shares of Block (NYSE: SQ), previously known as Square, have been clobbered this year, as high-flying growth stocks are being abandoned by investors due to sky-high inflation and soaring interest rates. Investors are also worried about the impact of a slowdown in consumer spending on fintech companies amid an impending recession. Further Block’s first-quarter results, which were impacted by a plunge in bitcoin (BTC-USD) revenue, added to investors’ woes.
Block stock has plunged nearly 64% this year, but what do Wall Street analysts predict about the days ahead?
Strategic Efforts
Block, which began its journey as a credit card processing company, has grown rapidly and has emerged as one of the leading fintech giants. Cash App, Block’s peer-to-peer payments ecosystem, is seeing strong traction, and the company continues to enhance this platform to attract more members.
Cash App is expanding customers’ access to bitcoin, and as of the end of the first quarter, there were over 10 million Cash App accounts that bought bitcoin since the product was introduced. In April, the company launched a new direct deposit feature called “Paid in Bitcoin”, which allows customers to have a percentage of their direct deposits automatically converted into bitcoin for free.
Meanwhile, Block is also enhancing its Seller ecosystem (now called Square) by enabling omnichannel transactions and building innovative solutions. To drive higher seller engagement, the company continues to introduce features like Square Marketing in additional regions. Square Marketing provides sellers more tools to retain and reengage their customers by driving repeat visits, increasing buyer spend, and building their customer base.
Block also strengthened its business with the acquisition of Afterpay earlier this year. Afterpay is a BNPL (buy now, pay later) platform.
Wall Street’s Take
Last week, Credit Suisse (CS) analyst Timothy Chiodo lowered his price target for Block stock to $170 from $180 due to rising interest rates – but maintained a Buy rating.
Chiodo noted that Block is building a two-sided network backed by Cash App and Afterpay, which is a competitive advantage, as it will help in lead generation and conversion compared to other merchant acquirers.
All in all, analysts see the stock as a Strong Buy based on 28 Buys and six Holds. The average SQ price target of $144.14 suggests 146.52% upside potential from current levels.
Conclusion
Despite near-term challenges, Block continues to strengthen its Cash App and Square ecosystems to capture further market opportunities in the domestic as well as international markets. The majority of analysts covering Block continue to be bullish about the company’s prospects in the fintech space.
What’s more, TipRanks’ Hedge Funds Trading Activity tool indicates that the Confidence Signal for Block is Very Positive. Overall, hedge funds have increased holdings by 18.4 million shares in the last quarter.
