Block The shares were on the right track for their second first day Friday, plunging more than 20% while investors digested a brutal quarterly report and a wave of demotion of analysts centered on a question: cash app.
The results of the first quarter Miss Miss Rattled Wall Street, encouraging several companies – including Wells Fargo, Seaport, BMO and Benchmark – to demo the stock during the night. Many have pointed out new concerns about the growth of user users in stagnant cash, moody consumers' demand and a gentle macro environment that can weigh on monetization.
“Stagnation in the number of active users of the application is even more worrying than reduced user expenses,” Benchmark wrote in his note, Downrading Block to Hold.
The financial service company has missed in all areas – on income, gross profit and payment volume – and has reduced its orientations in the year, citing macro uncertainty, lower consumption expenses and inferior inputs than reimbursement inputs during what is generally a high season of tax reimbursement.
“I just don't think we were sufficiently concentrated and that we had enough attention on the network and the density of the network, and it is our foundation,” said CEO Jack Dorsey when the winnings call. “We of course want to deepen the commitment with our customers thanks to banking services and to borrow, and I have no doubt that we will do it … But at the same time, we must make sure that we are continually increasing our network, and it starts with a peers.”
The cash application generated $ 1.38 billion in raw profits in the first quarter, up 10% compared to the previous year, but less of the $ 1.42 billion consensus. The monthly assets remained stable to 57 million – and the entries increased only by 8%, despite new features such as after -pay on the cash register and wider efforts to position the application in cash as a full -fledged banking alternative.
Block a graphic in stock of 5 days
Wells Fargo has called “many red flags of monetization of cash applications”, while Seaport underlined several consecutive quarters of the negative growth of VPGs. Even Morgan Stanley, who reiterated his overweight note, described the “surprising” Miss cash application – although she highlighted a better than expected momentum in the square sector, especially in international markets.
BMO degraded the stock for the market. Wells Fargo Said that did not want to “introduce yourself for the second half Hail Mary”, going to an equal weight. The sea port has been demoted to the neutral, by writing: “Will real Jack Dorsey get up?”
However, some have maintained optimism, with America Bank Reiterating its purchase rating, calling on the undervalued action, and Morgan Stanley To say that it was an attractive short -term entry point.
The block recovery plan is based on loans. The company claims that the CASH borrowing application – now approved by the FDIC to create loans through its banking subsidiary – will double the number of eligible users and improve the margins by providing internal maintenance.
Marketing expenses should also jump 50% in the second quarter while Block seeks to reactive growth in the half of the year.
“We are not sufficiently confident in the probability of such a rebound to recommend buying the stock on weakness,” Benchmark wrote.
Meanwhile, his rival Venmo shows signs of momentum.
Parent company Paypal said 20% of income for the application in the first quarter, driven by the increased adoption of the Vendo debit card, instant transfers and growing volume to the cash register. Although Paypal has not disclosed any exact income for Venmo, he said that user monetization improves – the result of a clear thrust to integrate VEMO deeper into electronic trade flows.
Two very different strategies take place now: Cash App is more deep in loans and banking services, while Venmo continues expenses to the cashier. But the objective, however, is the same: owning the consumer's portfolio.
Venmo currently seems to be gaining ground, while Cash App is gathering.
