On Friday, Raymond (NS:) James analyst upgraded Block Inc. (NYSE: SQ) stock rating from Market Perform to Outperform, setting a price target of $115.00. According to InvestingPro data, Block’s stock, currently trading at $86.75, appears undervalued based on comprehensive Fair Value analysis. The company has shown strong momentum with a 34.6% return over the past six months, despite its characteristic high volatility.
The upgrade was based on a detailed analysis of the company’s Seller Gross Payment Volume (GPV), which has instilled confidence in the firm about the stock’s growth prospects. The Seller GPV is considered a critical metric for Block Inc., and Raymond James expects it to return to double-digit growth in 2025, improving from approximately 8% in 2024.
The analyst’s optimism stems from several factors that are anticipated to contribute to this growth. These include easier comparative figures from previous years, an increase in sales momentum due to better distribution, ongoing international expansion, and continuous product innovation. While acknowledging potential uncertainties with the Cash App segment, where new active user growth has plateaued, the firm believes that increased engagement with the current customer base will support gross profit growth.
Block Inc.’s stock is deemed attractively priced for its growth potential, with projections placing it at 16 times its estimated 2026 Adjusted EBITDA, including stock-based compensation. The valuation also reflects an enterprise value to Adjusted EBITDA growth ratio of 0.5 times. The analyst’s report suggests that the current estimates for Block Inc.’s financial performance are well-positioned and that the company holds promise for investors looking for growth at a reasonable price.
The upgrade comes at a time when Block Inc. has been focusing on diversifying its revenue streams and enhancing its offerings. The company’s strategic emphasis on driving customer engagement within its existing base, despite the slowdown in user acquisition, is expected to underpin its gross profit trajectory.
InvestingPro analysis reveals Block’s solid financial health with a “GOOD” overall score, supported by robust revenue growth of 14.75% and a healthy current ratio of 2.07, indicating strong liquidity management. For deeper insights into Block’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
Investors and market watchers will be closely monitoring Block Inc.’s performance in the coming months, as it works towards achieving the growth acceleration outlined by Raymond James. The stock’s movement in the market will reflect investor sentiment on the company’s ability to execute its growth strategy and deliver on the expectations set by financial analysts.
With a market capitalization of $53.77 billion and analysts forecasting continued profitability, Block maintains its position as a prominent player in the Financial Services industry. InvestingPro subscribers can access 8 additional key insights about Block’s future prospects and valuation metrics through exclusive ProTips.
In other recent news, Block Inc. has been making significant strides in its financial performance and growth prospects. The company has entered a strategic partnership with global foodservice distributor Sysco (NYSE:) to offer advanced technology solutions to restaurants worldwide.
Recent developments also include the introduction of new features designed to streamline restaurant operations and improve cash flow. In addition, Block has been the subject of multiple analyst upgrades from firms including Bernstein SocGen Group, Monness, Crespi, Hardt, and BTIG, all setting new price targets based on a positive outlook for the company’s future performance.
The company’s financial performance has been robust, with a 19% increase in gross profit, reaching $2.25 billion, and an improved adjusted free cash flow of $1.5 billion. The company expects a 14% year-over-year growth for Q4 2024. Block also introduced a new inheritance feature for its Bitkey bitcoin wallet, simplifying the process of transferring digital assets to beneficiaries after the owner’s passing.
Looking forward, Block aims to achieve the Rule of 40 by 2026, focusing on mid-teens gross profit growth and a mid-20% adjusted operating income margin.
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