It’s been a busy few months for payments provider Block (SQ) .As well as entering new markets around the world, it has also changed its name from Square.
The US-based global technology company has rebranded to more accurately reflect the portfolio of businesses that it has created over the last 13 years.
The stock has lost 31.27% of its value in 2022 so far, wiping 13% in the last week amid the disappointing quarterly results and a wider technology and cryptocurrency selloff.Yet can it regain growth and what is shaping SQ share price forecast?
What does Block do?
The company, which states it is “creating tools to help expand access to the economy”, was formed in 2009 and went public six years later.It focuses on financial services and runs five distinct businesses: Square, Cash App, Spiral, TIDAL, and TBD54566975.
Square provides e-commerce solutions to help sellers run and grow their businesses, while Cash App enables people to send, spend or invest their money in stocks or bitcoin (BTC) .Spiral (formerly known as Square Crypto) builds and funds free, open-source Bitcoin projects, while TIDAL is a global platform for musicians that uses unique content and brings them closer to fans.
Finally, TBD54566975 is building an open developer platform to make it easier to access Bitcoin and other blockchain technologies without having to go through an institution.
Block (SQ) stock analysis amid tech sell-off
Block, Inc.
became a publicly traded company and began trading on the NYSE on 19 November 2015.
The stock was priced at $9 per share in its initial public offering (IPO) .The stock price stood at $111 at the market close on 26 January 2022.This is 1,133% higher than the IPO price just over six years ago.
Over the past five years it has risen almost 97% from $14.53 as interest in alternative payment systems and digital currencies has increased.More recently, however, the stock price has suffered from a combination of technology stock selloffs and disappointment with the company’s revenue growth figures.
This means the stock is almost 50% down over the past year, having endured a 60% drop from the $281.81 level it was at in early August 2021.A relative strength index (RSI) reading of 16.92 suggests the stock has reached oversold or undervalued territory.
Separately, Block doesn’t expect to pay any dividends for the foreseeable future.Future earnings will be used for the operation of the business.
Latest results
In a letter to shareholders , the company reported a gross profit of $1.13bn (£810m) for the third quarter of 2021, which is up 43% year-over-year and 51% higher on a two-year CAGR basis.
Total net revenue came in at $3.84bn, representing a year-over-year increase of 27%.
“Excluding Bitcoin, total net revenue in the third quarter was $2.03bn, up 45% year-over-year,” it stated.
Subscription and services-based revenue stood at $695m in the third quarter of 2021, up 55% year-over-year, while subscription and services-based gross profit rose 48% year-over-year to $563m.
Financial results for the fourth quarter and the full year of 2021 are due to be released after the market closes on 24 February 2022.
Global expansion
In its third-quarter shareholder letter, the company also outlined its recent entry into new markets, as well as reaffirming global expansion plans.
“We remain focused on our international strategy of achieving product parity globally, investing further into brand awareness, and launching in new markets,” it stated.
During the period, it launched Square Marketing in the UK, Australia and Canada, as well as Square Loyalty in the UK, providing sellers with “fully integrated solutions” that help “retain and reengage” more customers.
In September, it introduced Square Register and Square Card in Canada, bringing sellers a contactless way to sell, run their businesses, manage cash flow and access sales proceeds instantly.
The third quarter also saw the company expand in Europe by entering France with “an ecosystem of omnichannel products” and services.
“France has the second-largest card payments market in Europe, a flourishing small business environment, and a fast-growing eCommerce sector,” it added.
Name change
One of the most significant developments in the recent Block (SQ) stock news, however, has been the change of name from Square.This took place at the start of December 2021.
In a statement , Block said a new corporate entity was needed for the growing company as Square had “become synonymous” with its seller business providing commerce solutions to businesses.
Jack Dorsey, the company’s co-founder and CEO, said the Square brand was built for the seller business, whereas Block will distinguish the various operations from one another.
“Block is a new name, but our purpose of economic empowerment remains the same,” he added.
“No matter how we grow or change, we will continue to build tools to help increase access to the economy.”
Block (SQ) stock forecast: 2022–2030
The consensus view of 36 analysts compiled by MarketBeat put the stock as a ‘buy’ at the time of writing (27 January), with 26 analysts rating it as a ‘buy’, 9 as a ‘hold’ and 1 as a ‘sell’.
The consensus Block (SQ) stock price prediction was bullish, with the average price target for the next 12 months standing at $268 – ranging from a high of $371 to a low of $150.The average Block (Square) stock price target represented 141.44% upside for the stock at the time of writing.
Many Wall Street analysts revised down their target prices after the company revealed third-quarter results in early November 2021.The figures showed the revenue growth rate was slowing down and coming below analysts’ expectations.
Another set of analyst downgrades came early in 2022 as part of a broader market rotation out of growth stocks and into value names, with 10 analysts including Barclays, Jefferies, and Royal Bank of Canada, lowering their price targets for the Block stock.
According to the algorithm-based forecasting service WalletInvestor , Block is “an awesome long-term (one year) investment” that could rise 78% to $197.7 over the next 12 months.
The site predicted the Square stock price could be at $206.45 by January 2023 and reach $291.74 by the same point in 2024, while the SQ stock forecast for 2025 put it as high as $377.86.
Its long-term forecast took it to $461.71 by January 2026, while the five-year Block (Square) stock projection to January 2027 may see it hit $535.48.That’s 382% higher than its current level.
Note that price predictions can be wrong.Forecasts shouldn’t be used as a substitute for your own research.
Always conduct your own due diligence before investing.And never invest or trade money you cannot afford to lose.
Analyst commentary: “Disappointing last quarter”
According to Danni Hewson, financial analyst at AJ Bell, Block, as it’s now known, has definitely been caught up in the recent selloff of technology stocks.
“Shares in the payment services provider fell 30% over the last month and some of that can be put down to jitters about rate rises, but some of it comes down to investors considering if its valuation is just too high,” she told Capital.com.
“The dip might be seen by some as a buying opportunity,” she added.However, there are some issues to bear in mind.
“The company’s last quarter was disappointing with revenue growth significantly down on the previous three months and coming in below estimates, which markets never like,” Hewson said.
However, this is a tech stock that will benefit from the reopening of markets.
“The whole premise of its point-of-sale system is the smooth integration between physical sales and online activity,” said Hewson.“It’s expanding its reach and is now available in nine countries following its recent Spanish launch.”
In addition, while some sectors feel a “little like yesterday’s news”, she pointed out, Fintech is expected to boom over the next few years.
“Investors need to reset expectations and focus on how the business is performing and how it’s positioned for the future rather than look for the kind of stellar share growth, which seemed so normal for US growth stocks over the last couple of years,” she added.
FAQs
Whether SQ stock is a suitable investment for you will depend on your personal research, trading strategy and investment needs.You need to perform your own due diligence and decide if the stock meets your needs and appetite for risk.
The share price appears to have suffered from a combination of investors selling off technology stocks, as well as disappointment with Block’s recent revenue growth.A lot will depend on how the newly rebranded company performs in 2022.
According to the algorithm-based forecasting service WalletInvestor , it could rise 380% to $535.48 by January 2027.
However, note that price predictions can be wrong.
Forecasts shouldn’t be used as a substitute for your own research.Always conduct your own due diligence before investing.And never invest or trade money you cannot afford to lose.
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