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

PRICE TARGET CUTS: Several Wall Street analysts cut their price targets on Block’s shares last week ahead of quarterly results. Citi analyst Peter Christiansen lowered the firm's price target on Block to $135 from $185, while keeping a Buy rating on the name. Sentiment in the stock remains mixed, with investors encouraged by "healthy" Cash App trends but worried about how a cyclical downturn may impact both Cash App and Seller, Christiansen told investors in a research note. While proportionally smaller, bitcoin volatility and decelerating buy now pay later are additional headwinds to mind in the near term, the analyst added. Christiansen also reduced estimates to reflect bitcoin volatility and rising macro risk.

Wells Fargo analyst Jeff Cantwell also lowered the firm's price target on Block to $120 from $165, keeping an Overweight rating on the shares ahead of quarterly results. The analyst noted that Cash App and Square second quarter data look strong, but some headwinds coming from Afterpay and BTC. Ahead of earnings on 8/4, Cantwell sees a mixed bag.

Meanwhile, Oppenheimer analyst Dominick Gabriele lowered the firm's price target on Block to $112 from $150 but kept an Outperform rating on the shares. The analyst has a cautious stance on the spending environment in the second half of 2022/first half of 2023 given his macro work recently published. Gabriele thinks his payments companies' diverse verticals are likely to weather the storm while mono-line startups could falter.

CUTS TO ESTIMATES: On July 19, Macquarie analyst Paul Golding downgraded Block to Neutral from Outperform with a price target of $64, down from $140. The analyst said he expects short-term pressure in the shares from consensus EBITDA estimate cuts. The consensus has underestimated Block's operating costs, leading to an overestimation of adjusted EBITDA, Golding told investors in a research note. Beyond estimate cuts, the analyst sees risk of multiple contraction. Given a shift away from unprofitable tech names, multiples will refocus from sales-based to EBITDA-based, and multiples below those from the 2020s onwards will become the new norm, he contended. Golding forecasts Block's EBITDA margins will trough in fiscal 2022 post the Afterpay integration before seeing a gradual recovery from fiscal 2023 onwards.

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