Block, formerly known as Square, has been experiencing a significant financial downturn, with its shares plummeting nearly 45% since August, a trend confirmed by InvestingPro's real-time metrics, which show a 6 month price total return of -39.13%. The decline in stock price can be attributed to a series of setbacks including a two-day app outage and the abrupt departure of its CEO.
On Wednesday, Block's stock (NYSE:SQ) dipped an additional 0.9%, contrasting with the S&P 500's modest 0.4% rise. This recent drop further highlights the ongoing struggles the company is facing, and aligns with InvestingPro's tip that the stock has fared poorly over the last month.
In response to these challenges, Citigroup (NYSE:C) has adjusted its outlook on Block's shares. Initially setting a $90 price target, the banking giant has now downgraded it to $65. This new target suggests a considerable upside from Block's recent trading price of $41.41, which is in line with InvestingPro's fair value estimate of $74.91.
Despite the downgrade, Citigroup maintains a Buy rating on Block's stock. The bank views the recent plunge as an "overshot" and expresses confidence that the company's execution can rebound over time. They predict long-term growth potential for Block and anticipate a 25 to 30 times EV/Ebitda multiple, marking a decrease from their previous estimate of 35 to 40 times. This perspective is supported by InvestingPro's tip that net income is expected to grow this year.
Citigroup also emphasized the significant product development opportunities that lie ahead for Block, viewing them as key drivers for potential expansion in total addressable market (TAM). However, they caution that recovery will take time and suggest that the stock may be bottoming out. This aligns with another InvestingPro tip suggesting that the stock is in oversold territory.
Despite the current financial turmoil at Block, Citigroup's analysis presents a mixed outlook, acknowledging short-term difficulties while also highlighting longer-term growth potential and market expansion opportunities. For more detailed insights, consider exploring InvestingPro Tips, which offers a comprehensive list of 12 tips for Block, providing a more nuanced understanding of the company's financial performance.
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