Block Inc (NYSE: SQ), the point-of-sale payment provider formerly known as Square, is reporting its Q4 2022 earnings this Thursday, Feb. 24.
The usual market dynamic of ‘good report = stock price rise’ and ‘bad report = stock price fall’ may not be entirely appropriate to expect after the report’s release.
As we have seen over the past month, a favorable earnings report does not necessarily mean that the market will respond favorably in turn. For one, when Nvidia (NASDAQ:NVDA) reported its impressive Q4 2022 results on Feb. 16, its stock proceeded to sell-off. As of writing, NVDA is down 12% since its earnings call as investors were all too happy to overlook its earnings beats and strong guidance for the next quarter.
On the flip side, an unfavorable report can sink SQ stock considerably more than at any time in the past. Investors have little patience for growth tech stocks at the moment, with US Federal Reserve rate hikes just around the corner and post-covid revenue surge seemingly coming to an end. Will SQ suffer a similar fate to PYPL?
PayPal (NASDAQ:PYPL), a leading competitor of Block, reported it's own Q4 2021 earnings report three weeks ago, on the first day in February this year. While PYPL beat earnings expectations, its dismal guidance for Q1 2022 has helped tank the stock price 46% in 2022, YTD.
As of writing, SQ is not far off PYPL’s shocking price retreat. SQ’s stock price has lost 40% of its value, YTD.
An unfavorable report may push this loss into the 50s or even the 60s. Tech stocks dropping more than 20% in a single trading day is not unheard of this year, as you may have seen Meta Platforms (NASDAQ:FB) trim 25% from its market cap on Feb. 3.
Is there a buying opportunity with SQ stock? According to several investment banks and analysts, including Deutche Bank, Credit Suisse, SeekingAlpha, and MarketBeat, an even greater rout in the SQ’s share price may set investors up for a great long-term buying opportunity. SeekingAlpha and MarketBeat have price targets in the mid $200 range, which represent substantial upside potential.