Source: AdobeStock / sergign
Twitter Payments company of founder Jack Dorsey blockcalled earlier squarehas seen a downgrade pulled down by nothing other than Bitcoin (BTC) — or rather, the company’s “preoccupation” with it.
investment bank Mizuho downgraded Block from Buy to Neutral, arguing that the company is heavily focused on BTC, despite contributing less than 5% to Block’s gross profit.
As a result, although BTC transactions account for only a small percentage of gross profit, they appear to “disproportionately occupy management’s attention,” MarketWatch analyst Dan Dolev was quoted as saying in a note from Mizuho.
“Assessing the stock’s behavior shows that it is closely tracking Bitcoin. This is unfortunate as it distracts both management and investors from focusing on SQ’s broader ecosystem.”
Per Dolev, Block “still has tremendous potential,” but he argues that the company has several factors to worry about while also not capitalizing on its opportunities.
Dolev wrote that
“After years of being rightfully considered the most innovative name in payments, we believe that user fatigue, inflows have stagnated, and the best-in-class POS is being lost [point-of-sale] Status and BNPL [buy-now-pay-later] Misexecutions block SQ’s growth.”
Other worrying factors are:
- a slowdown in net additions as customer acquisition costs increase;
- Buy Now, Pay Later estimates are falling, but Block has acquired one such company, additional paymentearlier this year.
In the meantime, SMBC Nikko Securities America Analyst Andrew Bauch also lowered the rating on Block just a day earlier, suggesting that the crash in BTC’s price could lead to outflows from the company’s cash app.
However, Block isn’t the only company that has faced downgrades. Bitcoin supportive MicroStrategyas well as major crypto exchange coin base and online trading platform Robin Hooddid this, among other things.
As seen today, the block shares fell 5.92% to the price of $55.93.
As of Friday morning (UTC), BTC is training largely unchanged from the past day, priced at $19,048. It’s down 3.3% in a week and almost 12% in the last month. Overall, it has fallen 56% over the past year and is down 72% from its all-time high recorded in November 2011.
BTC 7-day price chart. Source: coingecko.com
– Block expects Bitcoin to disrupt old payments and boost its business
– Block Bitcoin Wallet Team reveals their plans and asks for feedback
– Jack Dorsey’s Block Announces Bitcoin Mining System and Builds Core Team
– Block, Coinbase Reports Positive Q4 Results Amid Growing Market Uncertainty
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers