Block (NYSE:SQ), formerly known as Square, definitely isn’t a “Magnificent Seven” stock in 2023. Indeed, SQ stock gets a “D” grade as it’s been a poor performer this year and has poor recovery prospects in the fourth quarter.Frankly, it requires an iron stomach to invest in Block with confidence.
You have to be willing to withstand the fluctuations of the cryptocurrency market, as Block has interests in crypto. You have to stay optimistic despite a scathing exposé on Block by analysts with Hindenburg Research. Besides, these aren’t the only concerns. So, let’s delve into the challenges facing Block as 2023 gets into its final months.
SQ Stock Disappointed Investors in September
Not long ago, InvestorPlace contributor Muslim Farooque identified SQ stock as one of September’s seven big losers. Today, the stock is down for the year even while many technology stocks are up. Perhaps we could call Block one of the “Un-Magnificent Seven.”
It didn’t seem to get investors enthused about Block when the company’s subsidiary, Square, announced a cannabis-market venture. Specifically, Square plans to work with an “online ordering platform service for cannabis dispensaries” in order to “to cater to cannabis sellers in Canada.”
Really, it’s probably better for Block to just stay in its lane. Investors probably don’t want to see the company go all over the place with various business ventures. Frankly, there’s no guarantee that Block will succeed with its forays into cryptocurrency, cannabis and elsewhere.
Block’s Abrupt Executive Change Causes Concern
In addition, there have been concerns pertaining to Alyssa Henry, who was the CEO of Square. Reportedly, as of Sept. 19, Henry made a single-transaction sale of $369,000 worth of SQ stock within the past 12 months.
Did Henry see major problems at Block that only an insider would know about? It’s possible, as Henry surprised some onlookers when she stepped down from her CEO position not long ago.
Henry had worked at Block “for over nine years,” acknowledged Block CEO Jack Dorsey, who took over Henry’s position. Hence, analysts with JPMorgan anticipated that “Henry’s departure will naturally raise questions.”
As a Barron’s report observed, “Block shares tumbled 2.2% on Sept. 19, following news of Dorsey taking the role.”
Evidently, the market wasn’t enthused about Henry leaving the CEO position at Square and Dorsey stepping in.
Don’t Expect a Fourth-Quarter Win for SQ Stock
We’ve noted the warning signs surrounding Block: insider share selling, a risky cannabis-market venture and an abrupt C-suite change-up. These concerns should make anyone think long and hard if they’re considering investing in Block now.
Unfortunately, Block disappointed many investors in September, and the company’s near-term outlook is uncertain. Therefore, we’re assigning SQ stock a “D” grade and can’t recommend it in 2023’s fourth quarter with confidence.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.