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Why Block Stock Got Knocked on Friday

The Motley Fool logo The Motley Fool 1/7/2022 Eric Volkman

What happened

One of the more liked and lucrative fintech stocks in our time, Block (NYSE: SQ), wasn't in favor on Friday. The company's shares ended up trading down by more than 2%, a steeper fall than that of the S&P 500 index, "thanks" to a pair of analyst price target cuts.

So what

Of the two chops, that from Royal Bank of Canada's RBC Capital was the deeper. Analyst Daniel Perlin lowered his price target to $203 per share from the previous $295. But he still believes in the stock, as he's maintaining an outperform (read: buy) recommendation on it.

Dollar symbol about to be cut by a pair of scissors. © Getty Images Dollar symbol about to be cut by a pair of scissors.

The same can be said for Truist Securities' Andrew Jeffrey, who's keeping his buy tag on Block stock despite a $65-per share target price slash.

This follows a pattern, as other analysts have also trimmed their price estimations for the shares in recent weeks. One example is Susquehanna's James Friedman, who trimmed his target on the fintech from $300 to $275, citing the outperformance of the company's popular Cash App following its 2019 redesign. By comparison, it should under-perform in the coming periods, affecting Block's overall profitability.

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Now what

While analysts and investors are right to be concerned about certain aspects of Block's business -- particularly since its core client base of relatively small businesses is struggling with the spread of the coronavirus' omicron variant -- the company is still showing impressive growth. 

And other investors are piling in. No less a stock market star than Cathie Wood is bullish on the shares. Clearly undeterred by these recent bearish swipes, on Tuesday and Thursday alone her ARK Innovation ETF bought a combined 426,083 shares of Block for its portfolio.


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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns and recommends Block. The Motley Fool has a disclosure policy.


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