Down 37% in a year, fundie says Block shares offer ‘very attractive rate of return’

A businessman stacks building blocks.

A businessman stacks building blocks.

Block Inc (ASX: SQ2) shares have well and truly been hammered over the last 12 months.

As you can see on the chart below, during this time, the payments giant’s shares have lost over two-thirds of their value. This follows weakness in the tech sector and concerns over a short seller report by Hindenburg research.

Is the Block share price weakness a buying opportunity?

QVG Capital’s portfolio manager of the long-short fund, Josh Clark, appears to believe that investors should be taking advantage of the weakness in the company’s share price.

Given that Clark goes both long and short with stocks, it may be comforting to learn that he isn’t concerned by the short seller report.

In fact, the portfolio manager believes the report has done investors a favour by dragging Block shares down to an attractive level. He told the AFR:

Despite the length of the short report, it failed to raise many novel points and found nothing existential. We view the report as a sideshow that has created a value opportunity as most of the concerns raised have natural counterpoints.

Clark then went on to explain why Block could be a great long-term pick for investors. He adds:

The short answer as to why Block is still a good bet is that it is an innovative banking solution for individuals and small business in a US banking system that is archaic in its experience. Block isn’t burdened by the corporate structure, legacy technology and costly network that its competition suffers from. We see a very attractive rate of return without heroic assumptions for future growth or margin.

Is anyone else bullish on Block?

Clark isn’t alone in believing that Block shares could be good value at the current level.

According to a recent note out of Citi, its analysts have a buy rating and US$90 (A$134) price target on its shares.

Based on the current Block share price, this implies potential upside of almost 50% for investors over the next 12 months.

The post Down 37% in a year, fundie says Block shares offer ‘very attractive rate of return’ appeared first on The Motley Fool Australia.

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More reading

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block. The Motley Fool Australia has positions in and has recommended Block. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia

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