Why Block Stock Got Mashed on Monday

What happened

Fintech Block (SQ -5.29%) had a frosty Monday on the stock exchange. The company’s shares fell by over 5% on the day, a far steeper tumble than the 0.4% slip experienced by the S&P 500 index. That didn’t exactly come as a surprise, as a company tracking the once high-flying stock downgraded its recommendation on the shares.

So what

To be clear, that company — Daiwa Securities — is still bullish on Block’s future, it’s just tempering its optimism. Monday morning, Daiwa downgraded its recommendation to buy from the previous strong buy. It also gave its price target a serious haircut, reducing it to $100 per share; this was formerly $170. The new level, however, still gives the stock more than 25% potential upside at its current price. 

Person pressing a tablet point-of-sale terminal in a shop.

Image source: Getty Images.

The reasons for Daiwa’s downshift and price target cut weren’t immediately apparent.

Regardless, Block shares have been on a roller coaster since the company published its first-quarter earnings earlier this month. It flipped to a deeper-than-expected loss during the quarter and also came up short on revenue, although investors traded the stock up immediately after those figures were released.

Now what

But the bears haven’t been keeping away from Block since then. Many investors are fearful of an economic slowdown, which would impact the company directly as its core retail and personal finance offerings depend on the health of the consumer economy. 

Mix that with general investor hesitation on tech stocks and steep declines in certain cryptocurrencies — an area of intense concentration for the company lately — and you’ve got a generally sour blend for the company. That said, it’s still growing in segments where it really counts, and it remains well poised to continue expanding its considerable finance ecosystem.

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