Block Inc.’s stock has been a sizable laggard this year, and now it’s losing the leader of a critical business — albeit one that hasn’t necessarily lived up to investor expectations lately.
Alyssa Henry, the head of Block’s SQ, -2.99% Square merchant business, is stepping down after a long tenure with the company, and Jack Dorsey will assume her role while continuing to lead Block on the whole, the company announced in a Monday filing.
The announcement comes as Block shares have declined 18% so far this year, while the S&P 500 SPX has risen 16%. Other payment-technology stocks, including Shift4 Payments Inc., FOUR, -0.54% Toast Inc. TOST, +1.34% and even PayPal Holdings Inc. PYPL, -1.98% have logged better year-to-date performances.
Block’s stock closed at its lowest level since April 7, 2020 on Monday, according to Dow Jones Market Data. It was down about 2% in after-hours trading.
The stock is also down 82% from its all-time closing high achieved Aug. 5, 2021.
The performance of the Square merchant business, which includes payment processing and other tools for sellers, has been a sore point for investors recently. Wolfe Research analyst Darrin Peller notes that Block’s second-quarter U.S. gross payment volume (GPV) was up 10% from a year earlier, a four-point spread above Visa Inc.’s V, +1.49% domestic growth. Historically, the spread has been in double digits, he said.
Additionally, while the 12% overall growth in Square’s GPV “continues to imply that Square is a market-share gainer, we note that this growth spread relative to the industry has trended lower and also suggests slightly softer growth trends versus competitors like Clover,” which is part of Fiserv Inc. FI, +0.12%, whose shares are up 20% on the year.
“While some of Square’s success over the years should be attributed to Alyssa’s execution, the company’s more recent performance remains a concern for investors (and we suspect for management, internally),” Peller wrote.
He pointed to “mixed” feedback from investors thus far.
“Bulls argue that this change is positive, indicating that management is taking change seriously,” Peller said. “Further, it’s worth noting that Jack has been more receptive to cost management and other adjustments. Meanwhile, bears are citing that Alyssa was the ‘face’ of Seller and was more receptive to changes in Square’s business model compared to Jack (particularly around outsourced distribution).”
Block, for its part, said in its filing that Henry “provided significant contributions” to the company during a tenure that spanned more than nine years.
UBS downgraded Block shares earlier this month, in part due to concerns about the Square business. Analyst Rayna Kumar said she was concerned about a potential slowdown in gross-profit growth owing to a moderation in consumer spending.