Block Inc (SQ) should try to downplay its association with Bitcoin because the link is holding back the stock, which would otherwise benefit from the payments company's improving business fundamentals, Mizuho Equity Research analyst Dan Dolev wrote in a note to clients.
- While Bitcoin has accounted for about 4% of the company's total gross profit over the past two years, that share is declining, Dolev said.
- Excluding Bitcoin, Block's gross profit is increasing, while its Cash App payment service showed strong engagement in March, Dolev added.
- Mizuho lowered its price target to $135 from $215, but maintained its buy recommendation. Shares of the San Francisco-based company have lost more than 50% this year, trading for about $74 on Thursday.
- Distancing itself from bitcoin could be a challenge. CEO Jack Dorsey is a bitcoin fan, has heavily promoted and supported the development of the Bitcoin Lightning Network and added bitcoin functionality to Cash App, among other things.
- Cash App generated $1.73 billion in bitcoin transactions and $43 million in gross profit in the first quarter.