Block shares were on course for his or her second-worst day Friday, plunging greater than 20% as investors digested a brutal quarterly report and a wave of analyst downgrades centered on one issue: Money App.
The primary-quarter earnings miss rattled Wall Street, prompting multiple firms — including Wells Fargo, Seaport, BMO and Benchmark — to downgrade the stock overnight. Many flagged fresh concerns around stagnant Money App user growth, muted consumer demand and a soft macro environment which will weigh on monetization.
“Stagnation within the variety of energetic users of the app is much more concerning than users’ reduced spending,” Benchmark wrote in its note, downgrading Block to carry.
The financial services company missed across the board — on revenue, gross profit and payment volume — and slashed its full-year guidance, citing macro uncertainty, weaker consumer spending and lower-than-expected inflows during what’s typically a powerful tax refund season.
“I just don’t think we were focused enough and had enough attention on the network and the network density, and that’s our foundation,” CEO Jack Dorsey said on the earnings call. “We after all need to deepen engagement with our customers through banking services and Borrow, and I actually have little question we’ll … but at the identical time, we want to be certain that we repeatedly grow our network, and that starts with peer to see.”
Money App generated $1.38 billion in gross profit in the primary quarter, up 10% from a yr earlier, but shy of the $1.42 billion StreetAccount consensus. Monthly actives remained flat at 57 million — and inflows rose just 8%, despite recent features like Afterpay on the Money Card and broader efforts to position Money App as a full-fledged banking alternative.
Block 5 day stock chart
Wells Fargo called out “quite a few Money App monetization red flags,” while Seaport pointed to several consecutive quarters of negative GPV growth. Even Morgan Stanley, which reiterated its chubby rating, called the Money App miss “surprising” — though it highlighted better-than-expected momentum within the Square seller business, particularly in international markets.
BMO downgraded the stock to market perform. Wells Fargo said it’s unwilling to “lay out for the second half Hail Mary,” moving to equal weight. Seaport downgraded to neutral, writing: “Will the actual Jack Dorsey please arise?”
Still, some maintained optimism, with Bank of America reiterating its buy rating, calling the stock undervalued, and Morgan Stanley saying it was a pretty near-term entry point.
Block’s turnaround plan hinges on lending. The corporate says Money App Borrow — now approved by the Federal Deposit Insurance Corp. to originate loans through its bank subsidiary — will double the variety of eligible users and improve margins by bringing servicing in-house.
Marketing spend can also be expected to leap 50% in Q2 as Block looks to reaccelerate growth within the back half of the yr.
“We should not sufficiently confident within the likelihood of such a rebound to recommend buying the stock on weakness,” Benchmark wrote.
Meanwhile, rival Venmo is showing signs of momentum.
Parent company PayPal reported a 20% revenue jump for the app in Q1, driven by increased adoption of Venmo’s debit card, easy transfers and growing volume at checkout. While PayPal didn’t disclose a precise revenue figure for Venmo, it said monetization per user is improving — the results of a transparent push to embed Venmo deeper into e-commerce flows.
Two very different strategies at the moment are unfolding: Money App is leaning deeper into lending and banking, while Venmo is chasing spend at checkout. However the goal, nevertheless, is identical: owning the patron’s wallet.
Right away, Venmo appears to be gaining ground, while Money App is regrouping.
