Shares Plunge Amid Concerns Over Cash App and Competition
Block’s (XYZ.N) stock plunged 22% on Friday, marking the largest intraday decline in five years. The selloff, which wiped nearly $8 billion from the company’s market value, was triggered by a downward revision of its 2025 profit forecast. Analysts expressed concerns about the performance of Block’s peer-to-peer Cash App and the mounting competition the company faces. At least eight brokerages reduced their price targets on the stock, citing weakness in Cash App and broader macroeconomic uncertainty.
Profit Forecast Cut Stirs Doubts Amid Economic Concerns
Block’s profit forecast cut raised eyebrows, as it was attributed to macroeconomic uncertainty, a factor that has affected many businesses. However, industry peers in the financial sector have reported steady spending trends, making Block’s outlook stand out. Despite concerns over a potential consumer spending slowdown due to President Donald Trump’s tariff policies, major bank executives have remained optimistic, citing a strong labor market as a buffer for near-term economic resilience.
Cash App’s Weakness Raises Long-Term Questions
Analysts are questioning whether the weakness in Cash App is cyclical or structural. BTIG analysts noted that the trend in Cash App is an “outlier” compared to its peers, raising concerns about its long-term viability. The app’s sluggish performance has prompted some analysts, including those at Jefferies, to suggest that the company’s forecast of 9.5% gross profit growth for the second quarter appeared “incredibly conservative.” This has led to increased skepticism about Cash App’s ability to recover in the near term.
Square Business Provides Hope for Block’s Future
While Cash App has been a source of concern, Block’s Square segment, which offers payment solutions to small and medium-sized businesses, remains a bright spot. Analysts at William Blair noted that Square is making competitive progress, which could provide a strong foundation for the company moving forward. Despite the challenges faced by Cash App, Square’s continued strength is seen as a potential counterbalance to the broader issues facing Block.
Stock Decline Could Present Opportunity for Investors
Despite the sharp decline in Block’s stock, some analysts see the drop as an opportunity for investors. The lower stock price could make the company more attractive, especially if it rebounds. However, caution is advised, as a further deterioration in the broader economic conditions could dampen optimism. J.P. Morgan’s Tien-tsin Huang echoed this sentiment, saying, “We’re cautiously optimistic recognizing margin for error is low in a tough macro backdrop.”