were poised to open in the red on Thursday after the payments company received its second downgrade this week.
Mizuho Securities lowered its rating for Block (ticker:
) to Neutral from Buy, slashing its price target to $57 from $125.
“After years of rightfully being deemed the most innovative name in payments, we believe user fatigue, plateauing inflows, loss of the best-of-breed [point of sale] status, and BNPL (Buy Now Pay Later) misexecution are blocking SQ’s growth,” analyst Dan Dolev wrote.
Dolev still believes the company has “enormous potential” that is not being realized as user penetration slows across the company’s three key segments: Cash App, Buy Now Pay Later platform AfterPay, and its seller-focused point of sales business.
Meanwhile, projects such as the company’s bet on Bitcoin “seem to disproportionately preoccupy management’s attention,” Dolev said. Bitcoin profits account for less than 5% of total company gross profit in the first half of 2022, he estimated, but the cryptocurrency initiative continues to drive sentiment around the stock.
Dolev’s downgrade follows a downgrade to Neutral from SMBC on Wednesday, and a double downgrade to Underperform by Evercore ISI last week. Evercore analyst David Togut said his downgrade was led by rising competition in the space, tightening credit, and an expected slowdown in macroeconomic growth.
The stock dropped 1.6% to $58.52 in premarket trading on Thursday. Shares have lost 63% this year, as of Wednesday’s close.
Block did not immediately respond to Barron’s request for comment.
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