Block (SQ) point-of-sale business concerns 'overblown' says Mizuho

Mizuho analyst Dan Dolev said Wednesday that concerns about Block's (NYSE: SQ) point-of-sale (POS) business may be overblown.

The analyst, who has a Buy rating and $85 price target on Block shares, explained that investors fear potential weakness in SQ's point-of-sale (POS) business amid growing competitive pressures from TOST in restaurants and Clover/FISV in next-gen POS.

"But new data points reveal that those worries may be overblown," the analyst wrote. "Specifically, we highlight the acceleration in SQ GPV in May vs. April, which juxtaposes unchanged US volume trends for Visa US over the same time period."

Dolev says in the note that last week, SQ's CFO said the company's GPV grew +12% YoY in the first seven weeks of the second quarter, with "an improvement in May relative to April."

"In our view, the bifurcation in trends vs. Visa reinforces SQ's CFO's recent commentary that new customer acquisition continued to be strong even in the midst of consumers pulling back spend. Plus, churn remains stable," the analyst added. "We view this as a positive for the stock, which we believe prices in execution issues at the POS business."

By Sam Boughedda

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