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Block’s link to Bitcoin ‘does more harm than help’, says Mizuho (NYSE:SQ)

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Shares of payments giant Block (NYSE: SQ), formerly known as Square, would fare better if bitcoin (BTC-USD) was not pictured, Mizuho analyst Dan Dolev wrote in a note Thursday.

“SQ’s over-association with Bitcoin is a disgrace,” Dolev said.

The analyst lowered his price target on Block (SQ) to $135 per share from $215, still implying a 78% upside from Thursday’s close. He also reiterated his buy rating. SQ shares surged 6.4% Thursday.

Bitcoin (BTC-USD) only accounts for less than 5% of Block’s (SQ) gross profit, so the cryptocurrency is unlikely to boost overall sentiment, the note said. But “branding SQ as a ‘crypto stock’ prevented the stock from benefiting from strengthening fundamentals, Dolev explained.

Meanwhile, Dolev said Block (SQ)’s fundamentals are strong as user engagement on its Cash app hit an all-time high in March. And by removing bitcoin (BTC-USD) from the mix, Block’s gross profit climbs on two- and three-year bases. But in the first quarter, Block’s gross profit of $43 million was down from $46 million in the fourth quarter of 2021.

Looking at the chart here, it is clear that bitcoin (BTC-USD) -45% has a positive correlation with the block (SQ) -65% stock over the past year.

Take a look at SA contributor Stone Fox Capital’s bullish view on Block.

Earlier, Block shares rallied after several tough months.