Block, Inc. (NYSE: XYZ), the parent company of Square and Cash App, has experienced a significant decline in its stock price following a disappointing first-quarter earnings report and a series of analyst downgrades.
The company’s shares fell by over 20% to $46.43, marking one of the steepest single-day declines in its history.
The earnings report revealed that Block missed Wall Street expectations on several key metrics. Revenue for the quarter was $5.77 billion, a 3% decrease from the previous year, primarily due to weaker Bitcoin-related growth and lower-than-expected discretionary spending.
Adjusted earnings per share (EPS) came in at $0.56, well below the consensus estimate of $0.97. Gross profit increased by 9% to $2.29 billion, but this was still below analysts’ forecasts of $2.32 billion.
Cash App, Block’s flagship product, faced stagnant user growth, with monthly active users remaining at 57 million. Inflows rose by only 8%, a concerning result during what is typically a strong tax refund season.
CEO Jack Dorsey acknowledged that the company was not sufficiently focused on network growth and density, which are critical for expanding banking services and lending features like Borrow.
In response to these challenges, several major analysts have downgraded Block’s stock. Wells Fargo reduced its rating from “Overweight” to “Equal Weight” and slashed its price target from $95 to $50.
BMO Capital Markets also downgraded the stock from “Outperform” to “Market Perform,” cutting its price target to $58. Morgan Stanley, KeyBanc, Raymond James, Canaccord, and others have also lowered their price targets, reflecting growing concerns about Cash App’s growth potential and the broader economic environment.
Block’s revised guidance for fiscal 2025 has further dampened investor sentiment. The company now projects a gross profit of $9.96 billion for the year, down from its previous estimate of $10.5 billion.
This cautious outlook reflects a softening macroeconomic environment and reduced consumer spending, which could hinder Cash App’s monetization efforts.
As Block navigates these challenges, its ability to execute on its strategic plans and restore growth momentum will be crucial in regaining investor confidence.
Despite the current setbacks, Block remains a significant player in the digital payments landscape, with ongoing initiatives to enhance its banking services and expand its user base.
However, the path forward will require addressing the stagnation in Cash App’s user growth and adapting to the evolving economic conditions.