Shares in Block (SQ) slipped on Tuesday following the announcement that Alyssa Henry, the current head of its Square payments unit, will be stepping down. However, analysts suggest that investor worries may be overblown.
Block's business encompasses various services, including the mobile payments platform Cash App, the point-of-sale system Square, and the "buy now, play later" service Afterpay.
Effective October 2, Jack Dorsey, the co-founder of Block and former CEO of Twitter, will assume responsibilities as the head of Square following Henry's departure. The company acknowledged Henry's significant contributions over her nine-year tenure with Block in its filing with the Securities and Exchange Commission.
While uncertainty may have prompted some investor concerns, analysts at J.P. Morgan led by Tien-tsin Huang express confidence going forward.
Fintech Industry Executives Embrace New Opportunities Post Pandemic
"Although Henry's departure is prompting questions, it aligns with the recent trend of executives in the fintech industry moving on after the pandemic," wrote analysts in a note. They dismissed the notion of Henry leaving for another prominent position, noting that she had previously worked at Amazon Web Services before joining Block.
The analysts expressed their approval of Dorsey taking on a direct leadership role in shaping Square's strategy. After all, he was one of the co-founders of the company when it was established in 2009.
J.P. Morgan rates Block stock as Overweight, setting a price target of $75 per share. On Monday, the stock closed at $51.25.
In a recent meeting with Block's investor relations team, Huang's team left with an overall positive outlook on the company's prospects.
The analysts expressed optimism regarding Square's early success in verticalized inbound and outbound selling, and predicted that this would fuel growth in 2024. Huang's team also commended Block's new investment framework introduced this year, stating that it demonstrated promising operating potential. Furthermore, they expressed hope that the company would continue to enhance efficiency and provide more indicators of profitability.
Addressing a recent outage at Square earlier this month, the J.P. Morgan analysts reassured investors that there would be no significant financial impact beyond the brief period when the platform was temporarily inaccessible. They also assured that no data was compromised during the incident.
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