After enduring a turbulent start to life as the freshly rebranded ‘Block’, SQ stocks recently slumped to a fresh 52-week low, sinking some 51.55% from its August 2021 high of $275.10. The company, formerly known as Square, has been on a consistent decline as part of a larger rotation out of growth stocks owing to fears over Fed rate hikes and growing rates of inflation.
Despite many tech stocks enduring a battering from the markets in recent weeks, Block stocks have suffered a 31% decline since the payment company’s name change from Square on December 1st 2021.
Table of contents
As we can see from Block’s (NYSE: SQ) price action over the past year, the company’s downturn began in the month before CEO Jack Dorsey left Twitter to focus fully on rebranding block and managing the company through the sweeping changes that are on the horizon.
In early January, Dorsey announced that Block will be “officially building an open bitcoin mining system.” The move is set to deliver on Dorsey’s enthusiasm for both blockchain and cryptocurrency.
Thomas Templeton, Block’s general manager for hardware added: “We want to make mining more distributed and efficient in every way, from buying, to set up, to maintenance, to mining. We see it as a long-term need for a future that is fully decentralized and permissionless.”
But what does this mean for Block’s stock performance? And could SQ’s latest hardships represent a fair buying opportunity for investors? Let’s take a deeper look at a company that’s harbouring some big ambitions:
Navigating Choppy Water for Growth Stocks
Like many other major growth stocks, Block has found it difficult to navigate the Federal Reserve’s move to end its bond purchases that took place in the early stages of the Covid-19 pandemic whilst raising interest rates for the months ahead.
Although Block operates across a range of sectors, many of the industries in which the company has a presence are becoming less popular among investors. Fintech, for instance, has been struggling to arrest a widespread market decline since November.
Block’s name change underlines the company’s intentions to build further into the world of cryptocurrencies. However, crypto markets have had to endure widespread downturns across the past quarter, and Bitcoin is currently sitting 39% below its early November all-time high.
Furthermore, Block has also grown into the buy now, pay later (BNPL) market after acquiring Afterpay for $29 billion, but recent scrutiny from investors has also thrown the BNPL industry into disrepute.
Unfortunately for Block, there may be no short term respite for the company from the industries that it’s immersed in. As inflation rates continue to rise, tech stocks have been experiencing high volumes of investor sell-offs of late. However, many market analysts remain bullish for the stock’s longer-term prospects.
The Ideal Buy Opportunity?
It’s worth remembering that for all of its recent hardships, Block still has a market cap today of $61.5 billion. The company has also evolved from its point-of-sale solution roots into a multi-faceted fintech giant.
Although the BNPL market has been underperforming in recent months, Block’s acquisition of Afterpay should be seen as a seismic statement of intent for the future of the industry.
“Given the fast-growing addressable market, SQ stock could be a great option for long-term investors,” explained Maxim Manturov, head of investment advice at Freedom Finance Europe. “For example, its Cash App has grown into a highly valued personal finance platform that serves more than 70 million active customers annually.”
“Also through the acquisition of Afterpay, Block offers its Cash App users a consumer credit product. Moreover, Block has announced the launch of a new division within the company that will focus on creating a decentralized bitcoin exchange. This will allow the cryptocurrency to be used for payments in various ways around the world,” Manturov added.
Despite struggling in recent months, it appears clear that Block has been entirely unfazed by its negative market performance. The company has made a range of bold moves across both new and traditional industries in a way that shows that CEO Jack Dorsey has his sights firmly set on the future.
Perhaps most notable is Block’s eagerness to incorporate cryptocurrency solutions into its platform – even despite the crypto market’s recent downturns in performance. While the recent falling price of Bitcoin may have caused some firms to shelve their plans, Block’s conviction shows that the company is confident that it can still outperform on the NYSE in 2022.
With this in mind, SQ is certainly a stock for investors to watch out for. Although Block’s performance since November has certainly been bearish, the company’s commitment to innovation means that we may see a quicker recovery occur depending on customer uptake of new services.
Jack Dorsey’s departure from Twitter to focus firmly on Block indicates that more ambitious changes are likely to be around the corner for SQ – the stock’s current underperformance may be recognized as a bargain for investors in the months to come.
