Block Is Fair Priced As Payday Lending Could Pressurize Valuation With Rising Delinquencies, Analyst Says

Mizuho analyst Dan Dolev maintained Block, Inc SQ with a Neutral and raised the price target from $57 to $69.
Payday lending (dubbed 'Borrow') is increasingly meaningful to Cash App gross-profit growth.
Payday lending is a near-term boost to inflows, but he worried it might pressure SQ's multiple as delinquencies across consumer lending continue to rise.
This is particularly concerning given Cash App's skew towards lower-income households.
SQ management shies away from providing exact dollar contributions from 'Borrow.'
Dolev estimated that $35 million -40 million of the sequential increase in 3Q Cash App GP ex-Afterpay reflected an increase in payday lending as a percentage of the mix.
It may account for well over >5% of Cash App GP ex-Afterpay.
The price target change reflected a higher 2022E.
Price Action: SQ shares traded lower by 5.63% at $69.25 on the last check Wednesday.

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