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Block, Inc. - A 2021 Pullback After A 2020 Parabolic Increase Sets The Stage For A Healthy Entry Point

Jan. 03, 2022 11:17 AM ETBlock, Inc. (SQ) Stock38 Comments
Anthony Cataldo profile picture
Anthony Cataldo


  • Block, Inc. enjoyed a parabolic increase in price-per-share during 2020, only to give back some of those gains in 2021.
  • Block, Inc. [formerly, Square, Inc.] changed its name, following the name change and rebranding action taken by Meta Platforms, Inc. [formerly, Facebook, Inc.].
  • Sentiment is, generally, unfavorable for Block, Inc., but I sometimes like to apply a “Dogs of the DOW” approach when deciding to “nibble” a few shares for an entry point.
  • There appears to be a powerful Tax Loss Selling – January Effect sequence, that has concluded, suggesting a favorable entry price-per-share.
  • I recommend a modest entry-level position in Block, Inc., at least for a January Effect “bounce.”.

Wall street sign in New York with New York Stock Exchange background

naphtalina/iStock via Getty Images


A Parabolic Increase Followed by a [Crash or] Pullback

Below is a chart developed from octmarkets.com. The table was developed from Wikipedia. Both were captured on January 3, 2022, before the pre-market open, as follows:

This article was written by

Anthony Cataldo profile picture
Full name for licenses is Anthony Joseph ("A.J.") Cataldo II, PhD, CPA.  Retired university accounting professor, CMA, CGMA and author of 10 books and 200+ articles and columns in 50+ different journals and outlets, with experience as CFO, Government Auditor, Public Accountant and Litigation Support Expert Witness in cases involving GM, Ford, and other big cap firms.  Years ago, the Securities and Exchange Commission used 3 of my research articles in a fraud case.  I have taught at 10 universities including Northeastern & UCBerkeley (online and during Covid).  I prefer long-term positions combined with the sale of covered calls.  There are exceptions.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (38)

Michael Clark profile picture
SQ resistance and support now.


127 NOW <----

Look for real tension beween buyers and sellers here
CW60 profile picture
SQ probably heading DOWN to less than 100
Xxfactor profile picture
I don't buy the "tax loss selling" theory here. Unless people only sell fintech for tax loss? Every fintech is down as bad as SQ and I still dont know why. The name change was a big mistake I hope they change back. It doesn't even fit the ticker and H&R Block is already suing them rightfully imo.
Anthony Cataldo profile picture
@Xxfactor I know about the HR Block lawsuit. Guessing they wanted to brand for BLOCKchain. Folks are dumping growth stocks and techs for energy and value stocks. Fed is pricing in for 4 hikes and "don't fight the Fed" is the first rule of equity trading. Anyway, this is the time to "nibble" these...when there is "blood in the streets." Sip, do not gulp on these. Stay well.
Michael Dolen profile picture
What is TTM and forward p/s without BTC revenue? From my understanding looks cheap, until you realize a bulk of the revenue is from almost no margin BTC transactions.
I am bullish on SQ for 2021. I agree that this is a good entry point. I like that Jack is not 100% focused on SQ and not other side projects like Twitter (let's face it, it was a side project).

They also seem to be building a new Accounts Payable product, according to a job listing found from someone from Revealera. Apparently it looks like something similar to $BILL
I would not even nibble on SQ. Let it fall and fall and then dead cat bounce then fall some more.

I prefer PYPL. Doesn’t have as much crypto taint. Doesn’t have the ARK taint. Doesn’t have Jack Dorsey.
taskassistant profile picture
@arnold.bird I think your onto something there. Although its being shorted to death. A cpl years ago they did it to Musk. I think Wall Street proves that they control Techie fortunes. Get in line or watch their fortunes evaporate. I do the Tech Titans had so much to do with last Pres. Election. So now its whose really in control here. For me I hate Jack Dorsey for many reasons. His propaganda payments process is a lie and all those people who are to make payments already have the product so where is incentive? Other vendors may be struggling but not from loss product and a/r.
Block is fantastic for small businesses. I highly recommend but Mngt is a fool.
Anthony Cataldo profile picture
@taskassistant I am nibbling into the metaverse stocks. No commission or friction, so a few shares here and a few shares there. Glance at the portfolio in the AM and see what is up or down a significant percentage or check for news. Stay well.
@taskassistant “Wall Street proves that they control Techie fortunes”

Definitely not. Wall Street is quite powerless, and often quite confused. With regard to what businesses turn out to be good investments. Wall Street didn’t short Tesla to death. It thought it would, but it couldn’t. Tesla succeeded despite Wall Street’s very sluggish and late understanding of the business.
AUMmmmmm....mmm..mm.nnnn profile picture
I also like to look at options as a measure of sentiment.
Try this:
Add a Probability of Expiring Cone to your charts
Set your charts to Maximum with a 1 year aggregation period.
Compare AAPL, AAOI, and SQ.
Can't believe they changed their name from Square to Block. What is the purpose? It is practically the same word and only serves to create confusion. The rebranding will cost an absolute fortune. It implies that the management is bad and that there is no dialogue going on, as proper discussion would have concluded that it was pointless and a huge waste of money. I remember that DONG energy changed their name, but that made sense, as they had changed into a wind power company.
Xxfactor profile picture
Couple factors: The entire fintech sector crashed. BTC crashing. Name change is stupid SQ was much better. People dont like the name and they have already been sued by H&R Block because they already go by that name.
Anthony Cataldo profile picture
@Xxfactor I saw the HR Block lawsuit reference. Thanks!
kualla83 profile picture
Wow, great insight. Summary, the stock is lower over the last 2 months. And yep, I bought 5-10 shares. Just wasted a few minutes of my life.
What Is fair value for sq 12 months from now
Orangejulius profile picture
@12grayzz The problem is that SQ is overpriced for their rate of growth. They're projected to grown earnings around 40% annually over the next 5 years according to some analysts, but the next 2 years look like a slow consolidation with only 13-25% growth.

If that's the case, the stock shouldn't be priced over 40x OCF. If they're repriced for 40x OCF one year from now, that price is approximately $90 a share. The stock was wildly overpriced last year at ~$250. Just pure, unadulterated stupidity. But then again, half the Nasdaq is priced that way.
Anthony Cataldo profile picture
@Orangejulius Actually, just turned on Bloomberg and some JP Morgan guy thinks lots of US stock are "on sale." Stay fun.
Orangejulius profile picture
@Anthony Cataldo Oh, the pump and dumpers have constantly said, "buy buy buy." The more uninformed money that flies into this market, the easier it is for informed money to take it.

I saw another financial news segment say financials are a bad place to be in December. Look how that panned out.
just like with pypl, you are too early here. You'll get it a whole lot cheaper over the next 90 days.
Anthony Cataldo profile picture
@jeffk100 There is no commission, so I tend to buy 5-10 shares to put the stock in my portfolio and on my radar screen. Stay well.
Monkeybrainsfriend1 profile picture
@Anthony Cataldo , don’t buy today, but in 30days and you can double you share purchase with the same dough, wait three months and get it for 37% of todays market price. ATS-Denver
Goose Droppins profile picture
For the last 4-6 weeks endless opportunities to trade SQ in either direction. RSI modeling paired with a short-term option position equals solid returns. For all the Square naysayers, SQ has not been the only Fintech hammered over the past 3 months. PYPL, SOFI, AFRM, Upstart and others. Should we expect these to fall another 50% from recent lows? Does Square and the entire sector go lower, maybe. But recent weakness is more a function of rising interest rates hurting high valuation securities, Plus, the author makes a great point, smart investors did cut bait to hedge losses against winners for tax purposes. This also has helped big 2021 losers fall farther in December. The good news is it's only January 4th and I will continue to monitor this stock for new opportunities on weakness and strength.
bazooooka profile picture
Would love to get in near a hundred again but this was a HUGE winner from Covid lows to a near ten bagger at the highs.
A good entry point is all the way back at $56. Still have another $100 to the downside.
taskassistant profile picture
@SeattleKraken wow thats a curse
I am buying! Thanks Anthony! As always!
Anthony Cataldo profile picture
@green growth Thank you for the kind words. AJ
Monkeybrainsfriend1 profile picture
Cut bait and run or you will get nibbled all the way to $86ish! That January affect/effect is a cascade of water pouring from the unmaintained roof top of SQ’s various headquarters and JD let the animals out of their cages, cuz it’s 2022 and the bell of freedom has rung…do you hear that pitter patter on your doorstep?, it’s the IRS checking up on all your crypto trades, Cash App side hustles(not reported, but your getting a 1099) to the outrageous fees on Tax prep and advance payments through the industrial bank. No worries the trusted Customer Service side of SQ is right as rain and is ready to help you get fitted in your orange jumper for three hots and a cot. ATS-Denver
Xxfactor profile picture
@Monkeybrainsfriend1 Lol this is an "issue" isnt it?
Monkeybrainsfriend1 profile picture
@Xxfactor , yes it is and the "players" got played by a master. ATS-Denver
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