Block (SQ) was downgraded to neutral from buy at investment bank Mizuho, which cited “user fatigue” and management’s fixation with bitcoin as reasons for the rating cut.
Cash App’s penetration among 18-45 year old Americans is likely to rise by just 500 basis points in 2022, which lags the 800-900 basis points seen annually over the previous three years, said analyst Dan Dolev in a note to clients on Tuesday.
In addition, Dolev noted that bitcoin (BTC) accounted for only about 5% of gross profit in the first half of 2022, but occupies a far higher percentage of management’s focus. Block’s fixation with bitcoin hurts the stock performance and takes away from the company’s larger platforms, said Dolev.
Alongside the downgrade, Dolev slashed his price target to $57 from $125 (the stock closed at $59.45 last night). Earlier this month, Block was on the receiving end of a double downgrade at Evercore ISI, which cut to underperform from outperform. In July, Macquarie also downgraded the stock.
Block is down 1.8% in premarket action. Shares are down 64% in 2022.
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