Block, Inc. (SQ) is engaged in creating tools that enable sellers to accept card payments and provide reporting and analytics, and next-day settlement services. The company operates through two broad segments, Square and Cash App.
In March, short-selling firm Hindenburg Research revealed short positions in SQ. The firm alleged that SQ had overstated its user numbers and understated its customer acquisition costs. Hindenburg is known for the $100 billion market rout its report created in India’s Adani Group.
SQ denied Hindenburg’s allegations and vowed to take legal action. The company has shaken off the report, as its first-quarter (ended March 31, 2023) total net revenue of $4.99 billion grew 26% year-over-year, topping the consensus estimate of $4.59 billion.
On the other hand, Hach Rose Schirripa & Cheverie, LLP commenced an investigation into the company this month about whether its acquisition of short-term financing company Afterpay Limited violated positive law, as well as issues with its Cash App business.
Amid this, let’s look at the trends of some of SQ’s key financial metrics to understand why it might be wise to avoid the stock now.
Analyzing the Ups and Downs in SQ’s Financial Performance from June 2020 to March 2023
The trend and fluctuations of the trailing-12-month net income of SQ are summarized as follows:
- June 2020: $302.97 million
- September 2020: $310.09 million
- December 2020: $213.11 million
- March 2021: $358 million
- June 2021: $573.5 million
- September 2021: $537.07 million
- December 2021: $166.28 million
- March 2022: -$76.92 million
- June 2022: -$489 million
- September 2022: -$503.75 million
- December 2022: -$540.75 million
- March 2023: -$353.39 million
From June 2020 to June 2021, there was an overall growth in net income, peaking at $573.5 million. However, since September 2021, there has been a significant decline. Net income took a negative turn in March 2022 and reached its lowest point in December 2022 at -$540.75 million. As of March 2023, net income is still negative at -$353.39 million.
The growth rate measured from the first value (June 2020) to the last value (March 2023) is approximately -216%. This indicates a substantial decline in SQ's net income over the given period.
The trailing-12-month revenue trend for SQ has generally shown an upward growth over the period from June 2020 to March 2023. Here is a summary of the key data points:
- June 2020: $5.88 billion
- September 2020: $7.65 billion
- December 2020: $9.50 billion
- March 2021: $13.17 billion
- June 2021: $15.93 billion
- September 2021: $16.74 billion
- December 2021: $17.66 billion
- March 2022: $16.56 billion
- June 2022: $16.29 billion
- September 2022: $16.96 billion
- December 2022: $17.53 billion
- March 2023: $18.56 billion
While the overall trend is positive, there have been few fluctuations within this period. Notably, there was a slight decrease in revenue between December 2021 and June 2022 before it started to increase again. Based on the first and last values in the series, SQ’s revenue growth rate is approximately 215%.
Below is a summary of the trend and fluctuations of the asset turnover for SQ from June 2020 to March 2023:
- June 2020: 1.05
- September 2020: 1.16
- December 2020: 1.20
- March 2021: 1.42
- June 2021: 1.48
- September 2021: 1.37
- December 2021: 1.33
- March 2022: 0.94
- June 2022: 0.76
- September 2022: 0.67
- December 2022: 0.59
- March 2023: 0.62
Notable observations and trends include: SQ experienced an increase in asset turnover from June 2020 to June 2021, peaking at 1.48. After June 2021, there was a downward trend in asset turnover, reaching as low as 0.59 by December 2022.
The most recent data point, March 2023, shows a slight increase in asset turnover at 0.62. The growth rate, calculated by measuring the difference between the last and first values, indicates a decrease of approximately 41.53% from June 2020 to March 2023.
The analyst price target for SQ has shown a declining trend from November 12, 2021, to June 23, 2023. A summary of the fluctuations in the data is provided below:
- Starting at $300 on November 12, 2021, the price target remained constant until December 17, 2021.
- A decrease was observed, reaching $297.5 by December 31, 2021, and maintaining this value until January 7, 2022.
- A more substantial decline was recorded between January 21, 2022, and May 27, 2022, with the target dropping from $284.2 to $163.75.
- The price target stabilized around $160 between June 3, 2022, and June 24, 2022.
- A sharp decline occurred between July 29, 2022, and August 19, 2022, with the target dropping from $130 to $119.5, followed by a period of stability until September 9, 2022.
- After another series of declines, the price target reached its lowest point at $90 on December 16, 2022.
- A brief increase to $91.2 was seen on December 23, 2022, before stabilizing at $90 from December 30, 2022, to February 24, 2023.
- In the closing months, the target experienced a slight rise to $95.7 on March 31, 2023, with fluctuations hovering around $95 until June 9, 2023.
- Finally, the value settled at $89 on June 23, 2023.
Overall, the growth rate between the first value ($300) and the last value ($89) indicates a drastic reduction of approximately 70.33% over the given period. The declining trend with occasional periods of stability suggests a bearish outlook for SQ in the eyes of analysts.
Analyzing SQ's Share Price Fluctuations: A Six-Month Overview
The trend and growth rate of SQ share price, based on the provided data, can be described as follows:
- From December 30, 2022 ($60.90) to February 3, 2023 ($83.78), there was a clear uptrend with accelerating growth rates.
- However, from February 10, 2023 ($79.98) to March 17, 2023 ($72.97), a downtrend occurred with decelerating growth rates.
- Between March 24, 2023 ($69.63) and April 6, 2023 ($67.79), the downtrend continued.
- From April 14, 2023 ($65.18) to May 5, 2023 ($59.72), SQ's share price experienced another downtrend.
- The price experienced a slight recovery from May 19, 2023 ($57.39) to June 2, 2023 ($60.77).
- Finally, the prices again started increasing from June 9, 2023 ($65.09) till the latest date of June 22, 2023 ($64.11).
In summary, the overall trend for SQ share prices was mixed with alternating periods of acceleration, deceleration, and sideways movement during the given period. Here is a chart of SQ's price over the past 180 days.
Analyzing SQ's Growth, Momentum, and Sentiment Performance
The overall POWR Ratings grade of SQ, a stock in the D-rated Financial Services (Enterprise) category with a total of 101 stocks, has maintained a consistent D (Sell) grade throughout the data provided. The latest value available is for June 23, 2023, with a POWR grade of D and a rank in the category of #75. Here is a summary of some notable dates and their respective ranks in the category:
- December 31, 2022: Rank #84
- January 7, 2023: Rank #81
- February 25, 2023: Rank #81
- April 22, 2023: Rank #79
- May 20, 2023: Rank #69 (best rank)
- June 23, 2023 (latest value): Rank #76
In recent months, the three most noteworthy dimensions of the POWR Ratings for SQ have been Growth, Momentum, and Sentiment. These dimensions displayed the highest ratings and exhibited clear trends.
- Growth: The Growth dimension has consistently been high, ranging from 96 to 99 between December 2022 and June 2023. The lowest rating of 96 was observed on June 22, 2023, while the highest rating of 99 was on March 31, 2023, and April 29, 2023.
- Momentum: The Momentum dimension showed a steadily increasing trend as the ratings went from 20 in December 2022 to 49 on June 22, 2023. This increase implies that the momentum for SQ has picked up over the months.
- Sentiment: The Sentiment dimension experienced fluctuations, initially increasing from a rating of 70 in December 2022 to 62 in January 2023. However, it dropped to its lowest point of 9 on April 29, 2023, before picking back up to 11 on June 22, 2023.
These three dimensions provide a comprehensive insight into how SQ is performing in terms of growth potential, price movement, and market sentiment.
How does Block, Inc. (SQ) Stack Up Against its Peers?
Other stocks in the Financial Services (Enterprise) sector that may be worth considering are Jiayin Group Inc. (JFIN), CPI Card Group Inc. (PMTS), and Everi Holdings Inc. (EVRI) - they have better POWR Ratings.
What To Do Next?
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SQ shares were trading at $62.41 per share on Friday afternoon, down $1.70 (-2.65%). Year-to-date, SQ has declined -0.68%, versus a 14.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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