Shares of Jack Dorsey’s fintech company Block (NYSE:SQ) gained 4.3% yesterday, following positive comments from a Wall Street analyst. Chris Brendler of investment banking firm DA Davidson stated that short seller Hindenburg’s report against Block is “considerably weaker than the market reaction implies.”
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Last week, Hindenburg Research reported that Block violates compliance standards and engages in fraud practices on its Cash App platform by inflating the number of users who are actively transacting. Analyst Brendler argues that although Hindenburg is a reputed firm and that the allegations should be taken seriously, the firm’s thesis for Block is “grossly overstated.”
Having said that, Brendler noted that Block’s Q4FY22 results displayed solid improvement, especially on the rising earnings before interest, taxes, depreciation, and amortization (EBITDA) front. Plus, SQ stock is trading at a huge discount to both its peers and its own historical average, “creating a compelling short-term buying opportunity.” Not just Brendler, but a few other analysts have also shared their reservations about the intensity of Hindenburg’s accusation and believe that Block will not take a major hit from the outcome.
Is Block a Buy, Sell, or Hold?
Despite Hindenburg’s allegations, Wall Street is still optimistic about Block’s stock trajectory. On TipRanks, Block commands a Strong Buy consensus rating based on 22 Buys versus five Hold ratings. Also, the average Block price target of $98.38 implies a nearly 48% upside potential from current levels. The 12-month price forecast also resonates with analysts’ views that Block’s stock is currently undervalued. Meanwhile, SQ stock has lost 13.3% in the past month.
