SQ - Block Is A Tale Of Two Growth Paths
2024-07-15 15:32:48 ET
Summary
- Block, Inc. may be reaching the end of growth in this economic cycle. CashApp may offer temporary support as the business environment deteriorates.
- CashApp and Afterpay may provide growth in the near-term as consumers opt for creative financing in the face of inflationary pressures.
- Management's "Rule of" expectations for eFY24 result in lower than anticipated revenue growth.
Block, Inc. ( SQ ) may be reaching the tail end of growth during this economic cycle. Management is refocusing their go-to-market engagement with food & beverage services companies as the industry faces continued pressure on sales growth and higher input costs. I anticipate these headwinds will trickle into Block’s Square segment, while the disparity of CPI may pressure consumers into more creative financing features, such as Afterpay. Given the macro environment and the limited growth potential for eFY24, I am downgrading my recommendation for SQ shares to a SELL rating with a price target of $55.31/share at 1.48x eFY24 price/sales....
Block Is A Tale Of Two Growth Paths