Why Block (XYZ) Is Sinking Today

Block (XYZ) is tumbling 18% after the fintech company reported significantly weaker-than-expected fourth-quarter results. However, investment bank TD Cowen kept a Buy rating on the shares.

A Look at Block’s Q4 Results

The company reported fourth-quarter earnings per share, excluding some items, of 71 cents, well below analysts’ average estimate of 87 cents. The company’s sales increased 4.5% last quarter versus the same period a year earlier to $6 billion and came in $230 million below the average outlook.

A modern fintech office space, its sleek lines and bright colors highlighting the cutting-edge focus of the digital banking technology.

On a positive note, XYZ expects its gross profit to increase “at least” 15% this year, versus the 14% jump that it delivered in Q4.

TD Cowen Remains Bullish on XYZ

Block’s gross margin is still high at 37%, while the company’s sales have climbed a strong 10% over the last year, TD Cowen stated. Further, the investment bank predicts that the growth of Block’s gross payment volume will accelerate, driven by the company’s marketing efforts. Moreover, TD Cowen is bullish on the company’s overall strategy and views the shares as undervalued.

TD Cowen reiterated a $115 price target on the shares.

The Recent Price Action of XYZ Stock

In the last month, the stock has dropped 23%, while it is down 26% in the last three months.

While we acknowledge the potential of XYZ, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than XYZ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.