Economic uncertainty has sent the S&P 500 and the Nasdaq Composite tumbling into bear market territory, and many growth stocks have lost more than half of their value during the ongoing decline. For instance, shares of Block (SQ 0.43%) and Atlassian (TEAM 2.96%) have dropped 78% and 74%, respectively, leaving both stocks near a 52-week low.
However, some Wall Street analysts see that as a buying opportunity. Joseph Vafi of Canaccord has a price target of $150 per share on Block (SQ 0.43%), which implies 192% upside from its 52-week low of $51.34. And Gregg Moskowitz of Mizuho has a price target of $255 per share on Atlassian (TEAM 2.96%), implying 124% upside from its 52-week low of $113.86.
Is it time to buy these growth stocks?
Block simplifies financial services for businesses and consumers with its Square and Cash App ecosystems. Square is a connected suite of hardware, software, and banking solutions that help businesses grow across physical and digital channels. The cohesive nature of those products distinguishes Block from traditional merchant-services providers (like banks), which generally bundle products from different vendors, leaving sellers to deal with complicated integrations.
Block brings that same simplicity to consumer finance. Cash App allows users to spend, borrow, and invest money from a single platform. That broad functionality helped Cash App become the most downloaded mobile finance app in the U.S. during the first half of 2022, but Block has only scratched the surface of its long-term vision.
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In the third quarter, Block reported solid financial results in spite of economic headwinds. Gross profit climbed 38%, representing particularly strong growth in the Cash App ecosystem. Non-GAAP (adjusted) earnings rocketed 68% to $0.42 per diluted share.
Looking ahead, Block puts its addressable market at $190 billion in gross profit, and management is executing on a strong growth strategy. Since acquiring the buy now, pay later (BNPL) platform Afterpay earlier this year, Block has made BNPL an option for all Square sellers, both in person and online. Building on that, Cash App consumers will soon be able to use the digital wallet to browse products and make purchases from Afterpay and Cash App Pay merchants. That could spark a powerful network effect. As commerce functionality brings more consumers to the Cash App, businesses are more likely to accept Afterpay and Cash App Pay, and vice versa.
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