Block (NYSE: SQ) has performed below par in 2023. While tech stocks generally have seen a sharp rise, Jack Dorsey Block stock has seen a significant downward trend. The stock is down 35.52% year-to-date.
In its fiscal Q2 2023 earnings report, Block reported a gross profit of $1.87 billion, an increase of 27% year-over-year. It was reported that Square generated $888 million in gross profit, an 18% year-over-year increase, while Cash App generated a $968 million gross profit, a year-over-year increase of 37%.
The company reported that Square’s banking products had performed quite well, with $167 million in gross profit, a 24% year-over-year increase. Most came from Square Loans, Square Debit Cards, and instant transfers.
Regarding active users on Cash App, the company reported that over 50% of users had a network of four or more accounts. Peer-to-peer transactions per active user reached an all-time quarterly high, while peer-to-peer volumes were $53 billion, an 18% year-over-year increase.
However, the company reported a net operating loss of $123 million for the quarter. On a more positive note, Block reported an EPS of $0.39, better than the analysts” prediction of $0.37, a 4.96% surprise.
Block Stock Negative Sentiment
Despite the great numbers reported in the Q2 earnings report, negative sentiment carried the day. The less-impressive aspects of the report carried the day. Analysts blame the stock’s poor performance on poor communication regarding its business direction.
One issue that stood out to investors was the slow growth in gross profit in Q2 2023. Additionally, there are worries about Square, amplified following the departure of CEO Alyssa Henry. Jack Dorsey took stepped in soon after. A recent outage of Cash App Square did not help the share price as it triggered the sale of SQ stock.
The Hindenburg Effect
One of the factors responsible for the current negative sentiment is a March 2023 report by Hindenburg Research. In the report, Hindenburg claimed that Block was showing inflated numbers due to the proliferation of fraudulent accounts on its cash applications. Consequently, Hindenburg accused Block of generating false revenue figures and exaggerated metrics.
The report claimed that up to 75% of the Cash App accounts it evaluated were fake, fraudulent, or were accounts tied to one user. It further stated that Block’s share price had 65%–75% fundamental downside levels at the time. Within hours of its release, Block’s stock took a 22.22% hit and was trading at $56.50. It has since fallen lower.
Block (SQ) Stock Price
Block (SQ) is trading at $39.46 per share as of 09:47 AM ED, October 27, 2023. It has already lost 5.33% of its value today, representing another bad day for its investors. In the past month, SQ stock has lost 10.47% of its value as negative sentiment regarding it persists.
Block Stock Forecast
Despite the poor performance, analysts give SQ a strong buy rating. They give the stock an average price target of $78, suggesting it could climb by over 97% year-over-year. On the high end, we believe Block could hit $110. Jack Dorsey could play a pivotal role in inspiring confidence in the stock.
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