Equity research analysts from Mizuho believe that Jack Dorsey’s payments firm Block Inc (NASDAQ: SQ) should downplay its association with Bitcoin (CRYPTO: BTC).
What Happened: In a note seen by Benzinga on Thursday, Mizuho analyst Dan Dolev called Block’s “over-association” with Bitcoin a shame.
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“Tagging SQ as a 'crypto stock' has prevented the stock from benefiting from strengthening fundamentals, including accelerating GP dollars ex-Bitcoin across both Cash App and Seller ecosystems,” stated Dolev.
In his view, Bitcoin does more harm than help and painfully reduced Square’s potential upside.
The Mizuho analyst noted that Bitcoin accounts for less than 5% of the company’s gross profit but the stock still trades based on sentiment around the leading crypto asset.
As an example of this, Dolev pointed to Coinbase Global Inc’s (NASDAQ: COIN) 26% decline post results where Block shares also slid 16%. Mizuho believes this was largely “a 'sympathy' trade for crypto-related names.”
See Also: Bitcoin Bull Jack Dorsey Likens Coinbase To A Casino
“We do not believe SQ's stock performance properly reflects strong underlying fundamentals, largely due to its apparent peg to fluctuations in the price of Bitcoin,” said the analysts.
Mizuho maintained its "buy" recommendation for SQ but lowered its price target to $135 from $215.
Price Action: According to data from Benzinga Pro, SQ shares closed 6.37% higher on Thursday at $75.76. Bitcoin was trading at $30,400, up 6.35% over 24 hours.
Photo courtesy: Block
