Block, PayPal and Affirm shares slide after Worldline warning. Are investors overreacting?

By Emily Bary

Worldline warned about Europe, but Block and Affirm have little exposure there, one analyst says

Shares of financial-technology companies were tumbling Wednesday after a European payments company issued a bleak warning -- but one analyst thinks Wall Street may be overreacting.

Among Wednesday's big losers are shares of Affirm Holdings Inc. (AFRM), down more than 12%; Block Inc. (SQ), down more than 6%; and PayPal Holdings Inc. (PYPL), down almost 5%. Those selloffs come after Paris-listed Worldline SA (FR:WLN) slashed its outlook earlier in the day, blaming weakening conditions in Germany and a pullback in discretionary purchases.

Worldline shares, meanwhile, shed more than half of their value.

Read more: Payment company Worldline's shares dive after profit warning as Germany deteriorates

But Mizuho's Dan Dolev chimed in to say that the U.S. payment-technology names were getting punished too much for a warning that didn't seem particularly relevant to their businesses.

"Stocks like [Affirm] and [Block] have little to no exposure to Germany & Europe, which means the negative stock reactions are unmerited," Dolev said in a note to clients.

Additionally, the comments from Worldline seemed at odds with the outlook that Visa Inc. (V) issued in a Tuesday afternoon report. The payments giant didn't bake a recession into its fiscal 2024 forecast, which came in above what some had been fearing.

"Plus, when asked about Europe, Visa's CEO mentioned 'resiliency' and feeling 'good about what's happening' in the EU ex. UK," Dolev noted.

See also: Amex calls out 'strong' spending and credit trends as earnings beat estimates

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-Emily Bary

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10-25-23 1214ET

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