Block (NASDAQ: SQ) stock price has erased all the losses it made after the Hindenburg Research short report in 2023. It jumped to a high of $87.52 on Wednesday, 125% above its lowest level in 2023. This price is a few points above $76, where it was trading before the Hindenburg report.
Turnaround strategy continuesBlock stock price nosedived sharply in 2023 after Hindenburg, the famed short-seller, published a highly critical report. In it, the company warned that Block was inflating its user numbers and that it was facilitating fraud.
He also accused the company’s insiders of selling shares worth billions of dollars after the stock surged during the pandemic. Hindenburg also noted that Block was highly overvalued. In the aftermath, the SQ stock price tumbled by almost 50% to a low of $38.70.
Block refuted these claims and the management continued implementing its turnaround strategy. The most recent results showed that the company was doing relatively well, signalling that the turnaround is working.
Block’s ecosystem jumped to over 56 million users while the total inflows jumped by 22% YoY to $248 billion. Its gross profits for the year soared by 25% to $7.5 billion while its cash flow rose to $515 million. Revenue for the fourth quarter came in at $5.6 billion.
Block stock price has jumped because of its exposure to Bitcoin and cryptocurrencies. Its Cash App business saw strong Bitcoin inflows during the ongoing bull run. This trend may continue rising ahead of the upcoming Bitcoin halving.
Further, Block has a strong balance sheet. It ended the quarter with about $6.3 billion in cash and short-term investments and just $5.4 billion in debt. Its cash balances have been growing in the past three quarters.
Taken together, Block has a strong moat in key industries in the financial services industry. It owns AfterPay, one of the biggest BNPL companies in the world. The BNPL industry is doing well since it is often cheaper than credit cards.
Block’s Cash App has millions of users in the US and the number may continue growing. It also has a strong market share in the payment processing industry.
Block stock price forecast
The daily chart shows that the SQ stock price has been in a strong bullish trend in the past few months. It has remained above the 50-day and 25-day Exponential Moving Averages, which is a positive side.
The stock has also formed an inverse head and shoulders pattern. In most cases, this is one of the most bullish signs in the market. It is also sitting at the neckline of this pattern.
The Relative Strength Index (RSI) has formed an ascending channel. Therefore, the stock will likely continue rising as buyers target the next important level to watch will be at $100.
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