Amid growing concerns about a US recession, one issue is how resilient Square-parent, Block (SQ), would be to an economic slump compared to other digital payment providers. In addition, the price of Bitcoin has again fallen below a critical threshold of $20,000.
SQ Stock: Market Evaluation
Amrita Ahuja, Squares chief financial officer, said at a Goldman Sachs financial conference in the middle of September that the company expects Cash App, excluding Afterpay, to have higher gross profit growth rates in the second half of 2022 than in the first half of the year.
Meanwhile, Block stock has fallen by 59% in 2022. SQ stock has underperformed against the S&P 500, which is down about 19%.
Square completed the purchase of Afterpay, an Australian consumer loan firm, on January 31. Its expansion has paused. Furthermore, fintech businesses such as Afterpay are subject to heightened regulation.
On September 14, Evercore ISI analyst David Togut downgraded Block stock to underperform.
We are downgrading SQ stock (NYSE:SQ) due to potentially growing headwinds to its Seller and Afterpay businesses, which are being driven by increased competition, tightening credit, and an expected slowdown in macroeconomic growth, negatively pressuring our 2023 gross profit and EBITDA estimates, Togut wrote in a report.
In a client note, Deutsche Bank analyst Bryan Keane noted that the business has reduced experimental and less efficient spending, as well as revising its risk loss modeling and lowering the pace of recruiting. We think SQ stock (NYSE:SQ) is poised for meaningful margin increase in 2023 and 2024 as a result of scale and a new cost discipline emphasis.
Square stocks (NYSE:SQ) principal business is to create a two-sided digital payments ecosystem, with solutions targeting commercial sellers and consumer purchasers. Individuals may use the Square Cash App to manage their money, purchase stocks and bitcoin, and do other things.
The increase and monetization of Cash App users are critical to the prospects for SQ stock. During the coronavirus outbreak, cash app growth skyrocketed due to government economic
support. The negative opinion is that Cash App growth will decline when the US economy normalizes.
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Author: Okoro Chinedu
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