Block Inc. sends some signs of near-term gains but investors should be skeptical. Here is why

By:
on Apr 7, 2022
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  • Block Inc.’s reference support is $96, and potential resistance is at $137.
  • At the valuation of $128 the stock may be overvalued, but slight gains are still possible.
  • Investors should hold and wait.

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Block Inc. (NYSE:SQ) is trading at $128 with a PEG ratio of 6.10. The expected EPS growth is 21.17%, as the company expects to see revenue gains. However, Block Inc. continues to face challenges in the generation of profits.

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The main focus for Block Inc. is the development of its cash applications business. With the potential that the payments industry foresees, investors consider Block Inc. a key large growth stock for their portfolios. Whether the expectations of investors will actualize remains to be seen.

Block Inc.’s reference support at $96 and resistance at $137

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Source – TradingView

The share price may have found new reference support recently, just below the $100 mark. Baseline analysis, however, shows that the stock would be expected to consolidate at $137. At the current valuation of $128, the stock is trading between the reference support and the expected consolidation point. The analysis presents the view that Block Inc. would in fact face resistance at $137.

A few signals might help investors make a decision. The current valuation of $128 is just at the 200-day moving average. The question, therefore, is whether the stock could pivot at this level.

The lower-term moving averages, 10-day and 20-day, are trending below the 50-day. With the latter at $200, we project that it will be a long time before convergence is recorded.

Lastly, the RSI just emerged from the oversold region though the signal at 28.36 is not yet out of the woods. We think that this is a good reason to buy.

Summary

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Fundamental analysis shows that Block Inc. could be overvalued. Nonetheless, the moving averages and RSI signal that there is still some room for the price to flex. We don’t think the price can rise above $137 any time soon.

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