5 big analyst cuts: Block has 'limited upside potential,' per UBS
Investing.com — Here is your Pro Recap of the biggest analyst cuts you may have missed since yesterday: downgrades at Block, Stem, General Mills , FMC, and Agiliti.
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Block (NYSE:SQ) was downgraded to Neutral from Buy at UBS, which also sharply cut the shares' price target to $65.00 from $102.00.
The analysts believe Block’s gross profit growth will likely decelerate in the second half of 2023 and throughout next year due to a softening in consumer discretionary spending, a decreased growth rate of Cash App monthly active users, and moderation of Cash App monetization rates.
UBS says that, despite Block consistently improving its profitability and surpassing quarterly adjusted EBITDA expectations, investors are primarily concerned about the company's gross profit growth potential, commenting:
«This was most evident following the 14% decline in shares after Block exceeded Street adjusted EBITDA by 30% in 2Q/23, while pointing to slowing gross profit growth for 2H/23E. With a lack of catalysts in sight, and re-acceleration of gross profit growth unlikely, we see limited upside potential.»
Shares were trading down in the premarket Wednesday, although recently they were off only marginally at $58.54.
Morgan Stanley downgraded Stem (NYSE:STEM) to Equalweight from Overweight on Wednesday and cut its price target to $8.00 from $12.00.
The analysts said Stem remains their preferred choice in the energy storage sector due to its significant emphasis on high-margin software offerings. However, they expressed concerns about the company's ability to reach its targets of 65%-85% growth in service and software revenue and achieving an
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