• KBW analyst now rates Block stock at market perform.
• Steven Kwok still sees upside in “SQ” to $75 a share.
• Block shares are currently down over 25% year-to-date.

Shares of Block Inc (NYSE: SQ) are trading down this morning after a KBW analyst downgraded the crypto company citing several “small risks”.

Block Stock could still climb to $75

Steven Kwok now rates the San Francisco-headquartered firm behind Cash App at “market perform”. His lowered price target of $75, though, still suggests about a 10% upside on its previous close.

The analyst finds Block stock a bit less attractive now that multiple risks are piling against it. His research note reads:

This big items revolve around rising competition within acquiring, and potential for regulatory scrutiny within its Cash App segment.

In February, Block Inc reported weaker-than-expected earnings for its fourth financial quarter.

Hindenburg has a short position in Block Inc

Kwok is not convinced that the company’s income from instant deposit fees or unregulated interchange are very dependable. Rising competition, he said in his research note, could also weigh on take rates, volume growth, and profitability.

Strength in its seller business is rooted in its in-store offering, and as more goods are sold online, this could shift purchase volume to marketplaces and eCommerce focused platforms like Shopify.

Last month, short seller Hindenburg Research also took aim at the crypto company, alleging that its Cash App has a lot of fake/duplicate accounts, many of which were involved in criminal activities.

Year-to-date, Block stock is down more than 25% at writing.

Jack Dorsey’s payment firm Block enters the list of Bitcoin-related firms facing downgrades. Investment bank Mizuho on Thursday downgraded Block from “buy” to “neutral” as management sets a significant focus on Bitcoin despite contributing less than 5% of Block’s gross profit. Recently, several firms including MicroStrategy, Coinbase, and Robinhood faced downgrades amid Bitcoin’s downfall.

Block Downgraded by Mizuho Analyst Due to Bitcoin Focus

Mizuho’s analyst Dan Dolev downgraded Block (SQ), the parent firm of payment company Square, from “buy” to “neutral” on September 22. Also, the analyst has slashed the price target from $125 to $57. He cites the management increased focus on Bitcoin and user fatigue related to point-of-sale and buy-now-pay-later as the reasons behind the rating downgrade.

“After years of rightfully being deemed the most innovative name in payments, we believe user fatigue, plateauing inflows, loss of the best-of-breed POS [point-of-sale] status, and BNPL [buy-now-pay-later] misexecution are blocking SQ’s growth.”

Last year, a Mizuho analyst gave outperform rating to the company’s stock as the price was trading above $200 amid the Bitcoin rally. Mizuho told clients the company has huge potential to grow like JPMorgan. However, the Bitcoin downfall has impacted the company’s financial performance.

Other companies including MicroStrategy, Coinbase, and Robinhood have also faced a downgrade as a result of Bitcoin’s price falling over 70% from its high in November 2021. Michael Saylor’s MicroStrategy announced losses of over $1 billion in its financial report in June. The crypto market crash forced investment banks including Goldman Sachs to downgrade Coinbase to “sell”.

While Mizuho’s analyst Dan Dolev believes Block has potential. However, management’s increased focus on Bitcoin despite accounting for less than 5% of gross profit in the first half of 2022 is a reason to worry. Meanwhile, rising competition in POS and BNPL is blocking its growth.

The shares of Block tumbled nearly 6% to $56.07 as a result of a downgraded stock rating. Block (SQ) was also downgraded by Evercore ISI and SMBC Nikko Securities America last week.

Bitcoin (BTC) Price Struggles Under $20,000

Bitcoin (BTC) price is struggling under the $20,000 level due to the strong U.S. dollar and macro factors. At the time of writing, the BTC price is trading at $18,998, down over 1% in the last 24 hours.

Popular analyst Rekt Capital predicts the Bitcoin price can actually fall below $15,000 due to historical chart patterns. The Bitcoin would likely bottom below $15,000.