A challenging start to 2022 for Block (NYSE:SQ) became slightly more so Thursday as Wall Street put SQ stock on the chopping block.
But given SQ’s increasingly attractive pricing off and on the price chart, SQ stock investors should be mindful of shares being put on a well-bid auction block shortly. Let me explain.
If one’s attention is on select blue-chips, Thursday wasn’t all that punishing of a session.
The most tightly-knit group of stocks which make up the Dow Jones Industrials fell less than 0.40% despite raised geopolitical risks tied to Russia’s invasion of Ukraine. Not too terrible, right?
SQ Stock Is Not Alone
But large-cap fintech Block took the overseas military escalations with a great deal more trepidation.
SQ stock surrendered more than 8% on the session.
Not that Block shares were alone. Technology as a whole saw much larger losses.
Snowflake (NYSE:SNOW). Opendoor Technologies (NASDAQ:OPEN). Shopify (NYSE:SHOP), Tesla (NASDAQ:TSLA) and many others saw heavier selling given the framework of today’s very fearful market narrative.
Tech, and in particular higher multiple growth plays, are seen at greater risk with hawkish interest-rate policy about to commence as central bankers combat the country’s worst inflation in four decades.
Yet unlike so many of SQ stock’s associated higher-multiple, growth stock peers, a combination of solid execution on its core seller ecosystem, blockbuster Cash App and relentless share pressure over the past several months reveals an affiliation that barely holds water.
Today, SQ stock sits at a historically low sales multiple of less than four times its share price.
What’s more, Block’s sales valuation is a far cry from an outfit like SNOW which sports a 77x multiple, SHOP stock’s nearly 19x or let alone the numerous growth companies which are pre-revenue narratives with no sales multiple whatsoever.
Also, Block is already profitable. And with its Afterpay acquisition now allowing the fintech to create a “closed-payment ecosystem between Cash App and its seller ecosystem,” the growth prospects for a well-discounted SQ stock look terrific.
SQ Stock Monthly Stock Chart
Source: Charts by TradingView
Aside from Block losing a hefty 71% at February’s low and still down 60% from last August’s all-time-high of $289.23, another indication of growth colliding with value is on SQ stock’s monthly price chart.
Technically, February’s candlestick has formed a bullish doji-style hammer pattern. A classic buy signal nearly occurred as March came on the calendar and traded within 50 cents of a trade-through above $131.95. Almost, but no cigar. Right? Wrong.
The expectation is that’s going to happen. And investors may consider getting a more calculated head start by purchasing SQ stock as it trades within the large monthly candle.
With the bottoming pattern wedged in-between Block’s lifetime 62% and 76% Fibonacci levels and backed by a burly uptrend line, only broken once during the onset of Covid-19, there’s strong evidence for SQ stock to bottom two years after the market’s historic March 2020 bear market low.
Given an oversold stochastics on the verge of a buy signal, I’d proffer bullish investors put SQ stock on their own silent auction block today. But don’t bid just yet.
Wait to make a smarter purchase of Block as the secondary indicatory gives the green light. Then and for likeminded investors, make that bid a more successful and less stressful purchase with a hedged and actively-managed collar.
On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
