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Why H&R Block Stock Dropped 8.5% Today

Rich Smith, The Motley Fool

What happened

Tax season is upon us, which you'd think would be good news for owners of H&R Block (NYSE: HRB) stock. Instead, H&R Block shares are falling, and they're down 8.5% as of 2:10 p.m. EST.

So what

You can "thank" Goldman Sachs for that. This morning, Goldman announced it is downgrading H&R Block stock from "neutral" to "sell." The analyst said it that Washington's passage of tax reform last year poses "structural challenges" to H&R Block's business of assisting filers in paying their income taxes.

Woman collapsed over tax forms.

Filing taxes could be easier this year -- and that could be bad news for H&R Block. Image source: Getty Images.

In particular, with the standard deduction doubled, there's less need for more taxpayers to figure out itemized deductions this year -- and thus less need to hire H&R Block to help them figure this out.

At the same time, Goldman notes that H&R Block has discontinued certain promotions in 2019, which could further undermine sales growth (albeit it would probably improve profit margins on those sales H&R Block does make).

Now what

Is Goldman Sachs right about any (or all) of this? It'll probably be sometime after April 15 before we know for sure. In the meantime, our first clue as to how bad a hit H&R Block is taking will probably come with fiscal Q3 2019 earnings results, due out in early March.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.