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Block encountered technical issues on Thursday, leading to their website going offline for an hour. Square app users experienced connectivity problems, affecting some sellers’ access to accounts and payment processing. By Friday, services began to recover.
Baird acknowledged the concerns raised by investors regarding Thursday’s processing issue but believes that the system is now operational. They consider the stock to be oversold at less than 3.5 times the estimated 2024 revenue, which is among the lowest valuations in their fintech coverage.
“Our fresh pick designation is built on two main considerations: Historical payments issues at large companies (breaches/processing issues/etc.) have typically been resolved quite quickly and stocks have recovered,” Baird analysts said in a note.
Secondly, Baird likes “the mid-teens GP growth (GP is our proxy for SQ revenue), while SQ trades at the lowest EV/revenue in our fintech coverage (3.5X 2024E GP),” the analysts added.
The historical track record indicates that breaches or outages, as long as they are promptly addressed and resolved, have not typically led to long-term issues for large processors.
The analysts see Block earnings EPS of $2.94 in 2025, up from the expected $2.26 in 2024 and $1.64 in the fiscal 2023.
SQ shares rose more than 1% in premarket Monday.
