Keeping It Simple

[eastunder]

Block could be on 'path of potential catalysts': Analyst

Julie Hyman and Luke Carberry Mogan
Thu, November 2, 2023 at 4:00 AM MDT
In this article:

https://finance.yahoo.com/video/block-could-path-potential-catalysts-100000201.html

Payment platform Block (SQ) will report its third-quarter earnings after Thursday's closing bell. The stock has fallen off by more than 36% year-to-date in 2023. Bank of America Securities Senior Payments Analyst Jason Kupferberg sits down with Yahoo Finance Live to share insights into the company and his "Buy" rating on the stock.

"The company has recently pivoted their go-to-market strategy to be more vertically oriented, and that's a new change that started this past summer," Kupferberg says. "We could see some results from that in a positive fashion into 2024."


Video Transcript
- Do you think that people should be buying Block going into this print, Jason?

Big ideas, bold decisions.
JASON KUPFERBERG: We do have a buy rating on Block. We are positive on the company. We think the stock is oversold. We think that fundamentals over a multi-year period will be better than what the stock is currently reflecting. We think that there's an incredible amount of concern reflected at this multiple both on the consumer facing cash app side of the business, as well as the merchant facing seller side of the business.

And we see investor sentiment, probably being about as low as it's ever been in this stock. So we do see positive risk reward.

- And Jason, beyond the stock, obviously, it's had a rough year. We're down 35% year to date. Beyond earnings, Jason, are there certain dates that investors would have on the calendar as potential catalysts for this stock that you would look for?

JASON KUPFERBERG: I think it's less about specific dates. I think it's more about a path of potential catalysts and what that could look like, for example, would be some amount of reacceleration in the merchant facing seller side of the business from a gross profit growth perspective.

We do think that Q3 is going to feel some pressure, in part because of the platform outage that we saw in early September. We do think that there is the prospect for a little bit of reacceleration starting in the fourth quarter. The international side of the seller business is actually performing well, and the company has recently pivoted, their go-to market strategy to be more vertically oriented.

And that's a new change that started this past summer. We could see some results from that in a positive fashion into 2024. The other potential part of a catalyst path could be some more significant cost-cutting. Here at the company, we do think that as a result of a recent benchmarking exercise that we ran, there could be some real upside to the EBITDA performance of the business in 2024.

- And Jason, I think some investors in this space, you know, I think maybe some got a little spooked when French payments processing company Worldline cut its guidance that did make some people nervous. Is there any read through the square or not or no?

JASON KUPFERBERG: No read through from Worldline. They don't really have any operations in Germany. And that was the primary country that Worldline cited for weakness and other payments companies, US payments companies that have reported so far this earnings season have not identified that as a source of weakness either.