Here's Why Block Stock Sank This Week
What happened
Shares of financial technology (fintech) company Block (NYSE: SQ) are having a rough week. As of Friday morning (before the market opened), Block stock had dropped nearly 14% for the week, according to data provided by S&P Global Market Intelligence.
Negative stock market conditions are partly to blame. The S&P 500 is down almost 3% for the week, as of this writing. So it's only natural for Block stock to be down as well. But investors are also digesting the news that an executive for the company stepped down this week. And I believe it's causing confusion.
So what
On Sept. 18, Block filed an official update with the Securities and Exchange Commission (SEC) stating that Square CEO Alyssa Henry is leaving on Oct. 2. Square is the part of Block that provides products and services for merchants.
However, Block used to be named Square whereas nowadays Square only refers to one part of the business. Based on anecdotal evidence, I think investors are confused, believing that the CEO of Block is leaving, which isn't true.
It appears that this possible mistaken identity may have sparked a bigger decline with Block stock than what would have happened otherwise.
Now what
Cofounder Jack Dorsey is still the, ahem, Block Head. So there's no change in leadership at the top. From here, Dorsey will take over duties from Henry for the Square business segment as well.
After this week's drop, Block stock now trades at its cheapest price-to-sales ratio ever at 1.39. In the past couple of years, I've been critical of the company's long-term vision and fiscal discipline. But the business is still growing and has potential. In my view, the stock is simply too cheap to ignore at this price and investors should spend time to decide whether they should buy Block stock.
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Jon Quast has positions in Block. The Motley Fool has positions in and recommends Block. The Motley Fool has a disclosure policy.
