By Sam Boughedda
Truist analysts told clients in a note Monday they should add to Block (NYSE:SQ) as they are increasingly convinced "detractors have a hollow argument."
The analysts reiterated a Buy rating and $105 price target on the stock. Their note follows the recent short report on Block from Hindenburg Research, with the short-selling firm accusing the company of inflating user metrics and not dealing with illicit activity on the platform.
On the user metrics argument, the Truist analysts said they believe it is spurious, "as management has always focused on MAUs, citing 51 million as of 4Q22." Meanwhile, on allegations of the platform being used for criminal activity, analysts stated their firm believes "the majority of fraudulent volume is conducted by a small minority of bad actors."
"Whereas some negative comments have merit, in our opinion, they materially miss the larger picture: Cash App is a legitimate digital consumer and SMB alternative to traditional checking/debit accounts that do a poor job serving an emerging generation of savers, spenders, and entrepreneurs," wrote analysts.
"Cash App has a significant first-mover advantage among neo banks, in our opinion, and while imperfect, has emerged as the most important digital debit model."