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The
San Francisco, California-based company saw nearly $3.5 billion
wiped off its market value by 6:20 a.m. ET. The stock has fallen
more than 44% this year.
Block on Thursday reported a loss of 36 cents per share in the
second quarter, compared with a profit of 40 cents last year,
and said it had slowed hiring and would cut its 2022 investment
target by $250 million.
"The act of cutting spend suggests SQ is bracing for potentially
weaker growth," JPMorgan analysts wrote in a note.
However, the brokerage maintained its "overweight" rating and
$107 price target for the stock, citing underlying earnings
potential from its buy now, pay-later business, which earned
$150 million in gross profit in the quarter.
Investor enthusiasm over bitcoin and other digital currencies
has ebbed this year, as red-hot inflation and the Federal
Reserve's tightening of monetary policy have led to a selloff in
risky assets.
That has hurt companies such as Block, which rode the bitcoin
frenzy to post robust earnings last year.
Block's bitcoin gross profit - or what the company earns from
the spread on buying and selling the cryptocurrency - plummeted
24% to $41 million in the quarter from $55 million a year
earlier.
"Shares had rallied by almost 35% during the eight trading
sessions prior to the print. The company likely would have
needed to produce a nearly flawless report in order for that
surge to continue," according to analysts at BTIG.
Jefferies and RBC Capital Markets, however, raised their price
targets, saying Block's decision to cut costs would position it
strongly to deal with a tough economic environment.
(Reporting by Niket Nishant in Bengaluru; Editing by Shinjini
Ganguli)
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