Block Stock Price Down 28% in 2022 – Time to Buy SQ Stock?

While Block (SQ), which was formerly known as Square, has come off its 52-week lows, it is still down almost 28% in 2022. The stock now trades at a discount of over 60% from its 52-week highs.

Some investors like to buy fundamentally strong stocks when they crash, a process known as bottom fishing. What’s the forecast for SQ stock in 2022 and should you buy the dip in this fintech stock?

Block to release its fiscal fourth-quarter earnings

Block would release its fiscal fourth-quarter 2021 earnings next week. Analysts expect the company to report revenues of $4.06 billion in the quarter, a YoY rise of 28.8%. It is expected to post an adjusted EPS of $0.37, 8.8% higher than the corresponding period in the previous fiscal year.

Overall, analysts expect the company’s sales to rise 85.9% in the fiscal year. The growth is expected to fall to 14.9% in the current fiscal year. The expected growth slowdown is among the reasons fintech stocks have been weak. PayPal, which released its earnings earlier this month said that it expects the topline to grow between 15-17% in 2022, which was way below estimates. The stock fell to multi-month lows after the earnings release as markets were concerned about the growth slowdown.

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What to watch in earnings?

Last year, Block had announced the acquisition of Australian BNPL (buy-now-pay-later) company Afterpay in a $29 billion all-stock deal. The deal’s valuation however came down amid the crash in Block’s stock price. While announcing the deal, it had said that “the acquisition aims to enable the companies to better deliver compelling financial products and services that expand access to more consumers and drive incremental revenue for merchants of all sizes.”

During the upcoming earnings call, Block might provide some details on the Afterpay merger. The deal has completed after it was approved by the stockholders of both the companies and also cleared key regulatory hurdles. Also, along with the earnings, the company’s guidance would be keenly awaited by the markets given the expected slowdown in growth.

SQ is focusing on blockchain

Square changed its name to Block to reflect the growing importance of blockchain for the company. The company has also invested in bitcoins and sees cryptos as a key growth driver. Also, Jack Dorsey has quit as Twitter CEO which will help him focus on Block. After Dorsey quit Twitter, Bank of America upgraded Block stock.

Block stock forecast

Block is among the must-have fintech stocks. The company’s CFO Amrita Ahuja believes that there is a $100 billion TAM (total addressable market) for the company’s Seller App and a $60 billion TAM for its Cash App. Currently, Block only has a 2-3% share of these markets. Along with increased market penetration in existing markets, SQ has the opportunity to expand in several international markets as well. The consolidation of Afterpay and its integration with the other business verticals would be another key driver for Block.

Block stock target price

Wall Street analysts have a rosy forecast for Block stock. Of the 42 analysts covering the stock, 28 have a buy rating while only two have a sell rating. The remaining 12 analysts have a hold rating. SQ has a median target price of $222.5 which is a premium of 93%. The stock even trades below its street low target price.

Bank of America sees a massive opportunity in Block stock

Bank of America expects Block stock to deliver good returns over the next year and upgraded it from a neutral to buy while assigning a target price of $185. “The market is not currently ascribing nearly enough value to the Cash App business, and once management provides some clarity on forward-looking Cash App expectations, which could happen as soon as the 4Q21 earnings call on February 24, we believe the Street would recalibrate its view on SQ’s valuation, ultimately driving outperformance in shares from current levels,” analyst Jason Kupferberg.

While Kupferberg said that there are concerns over the outlook for Cash App and the rising interest rates, he added, “we believe the above concerns in aggregate have become over-discounted in share.”

Fintech stocks are a good long term investment opportunity

The outlook for fintech stocks is positive and along with green energy, it looks among the most promising investing themes. “We believe Cash App may be en route to becoming the ultimate neo-bank and the money center bank of the future. This could make buying SQ analogous to buying J.P. Morgan in 1871,” said Mizuho analyst Dan Dolev in a note last year

JPMorgan also sees the fintech revolution as a big opportunity. “Fintech innovation and increased demand for digital services are the real Covid-19 story with the rise of online start-ups and expansion of digital platforms into credit and payments,” the largest US bank said in its note.

Should you buy Block stock?

If you are looking to buy a fintech stock for the long-term Block looks a good option and Jefferies has termed it as a “must own stock.” There are concerns over Apple’s aggressive forays into the fintech space. It was previously rumored to get into the BNPL industry. It is planning a new service that would let iPhone users accept payments directly without having to connect with an external hardware. The product would compete against Block’s Sellers App.

Apple’s CEO Tom Cook listed financial services as a big opportunity for the company. During the fiscal first quaretr 2022 earnings call, he said “I would say that I think Apple Card has a great runway ahead of us. It was rated to the No. 1 midsized credit carding customer set by J.D. Power and is getting — has fast become people’s main credit card for many, many people.”

Cook added, “And the growth of Apple Pay has just been stunning. It’s been absolutely stunning. And there’s still obviously a lot more there to go — and because there’s still a lot of cash in the environment.” That said, at current prices, Block looks like a good stock to buy and bet on the secular growth in the fintech industry.

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