Block (SQ) is scheduled to report results of its first fiscal quarter after the market close on May 4, with a conference call scheduled for 5:00 pm EDT. What to watch for:

SLOWING APRIL CONSUMER TRENDS: On Monday, KeyBanc lowered the firm's price target on Block to $85 from $100 and kept an Overweight rating on the shares ahead of quarterly results. The firm notes that its proprietary data analysis indicates the potential for Q1 upside. Block remains a key idea as KeyBanc sees a combination of steady top-line execution and potential for further opex discipline and thus EBITDA upside to serve as positive catalyst throughout the year. Despite a solid Q1, the firm expects slowing April consumer trends and lower tax refunds to point towards more in-line guidance commentary.

Jefferies also lowered the firm's price target on Block to $80 from $90, keeping a Buy rating on the shares. Seller's gross payment volume growth deceleration has sparked concerns that Block is facing heightened competitive pressure, notes the firm, which adds that Block's key end-markets slowed meaningfully throughout 2022 and that card-present is still growing at over twice the market rate, which it sees suggesting a "healthy competitive position at POS." Toast (TOST) is negatively impacting Block's pace of share gains in the food/drink vertical, added the firm following its deeper dive in Block's Seller segment growth.

POSITIVE CATALYST: Ahead of Block reporting Q1 results on May 4, BofA told investors it believes the print and guidance could be a positive catalyst given that shares have lagged the S&P 500 by 1,880 basis points since a short seller issued a report targeting the company March 23. The firm, which contends that Block is undervalued and its business model resilience is underappreciated, sees more upside at Cash App than Seller and sees adjusted EBITDA "having the most significant upside potential" and thinks initial full-year 2023 adjusted EBITDA margin guidance could be raised. BofA maintains a Buy rating and $96 price target on Block shares.

MILD BEAT: Baird doesn't view Q1 as likely to be a big catalyst for Block, though it sees the risk/reward as quite good over the course of the year. First quarter EPS likely beats the Street mildly, though investors will focus on March/April trends where Seller is likely decelerating, while CashApp is likely continuing to grow well, the firm contends. Baird maintains its Outperform rating and $92 price target on Block’s shares.

GROWING NUMBER OF RISKS: Last month, Keefe Bruyette downgraded Block to Market Perform from Outperform with a price target of $75, down from $90. Block is facing a "growing number of risks" that will keep investors out of the name over the next year, primarily around rising competition in acquiring, and potential for regulatory scrutiny in Cash App, the firm told investors in a research note. The firm believes "many small risks are starting to add up" for the company.

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