Block Inc (SQ)

Block Inc (SQ) stock fell by 6.18% due to a downgrade from Morgan Stanley analysts, who lowered the rating to Underweight from Equal-Weight and reduced the price target from $62 to $60. The downgrade was driven by doubts about Cash App's ability to grow, especially with Gen Z consumers.

• Block's Fourth Quarter Performance: Block's fourth-quarter 2023 results affirmed management's focus on profitability and the goal to achieve the "Rule of 40" by 2026, which combines gross profit growth and adjusted operating income margin. The company also announced a shift in strategy, redirecting investments towards banking products on Cash App to position the app as the primary bank account for more users.
• Challenges and Opportunities for Cash App: Some skeptics noted that payments/technology stocks typically command higher multiples than those with bank-like characteristics, posing challenges for Cash App's positioning as a neobank. However, Cash App's strategy focuses on persuading more users to deposit their paychecks directly into the app and adopt the Cash App debit card. While only 3% of MAUs were directly depositing paychecks into their accounts as of fourth-quarter 2023, ~40% had adopted the debit card.

On Monday, the payment stock experienced a 2.58% decline in its shares after being downgraded from "outperform" to "market perform" by KBW. The reason for the downgrade was attributed to several factors, including the accumulation of small risks, such as possible regulatory scrutiny of the company's Cash App business.

https://www.cnbc.com/2023/04/10/square-block-stock-outlook-jack-dorsey-payments-cash-app-risks-investing.html

SQ is dropping to around 10.72% today since Hindenburg Research accused Block of allowing criminal activity to take place with little oversight, as well as inflating the user base of its Cash App, which is a key metric for evaluating the company's performance. These allegations may have caused investors to lose confidence in the company's ability to maintain regulatory compliance and attract legitimate customers.

It is important to note that allegations made by short sellers can sometimes be controversial and are not always substantiated. It remains to be seen how Block will respond to these accusations and how they will affect the company's future performance.