Block stock outlook remains positive ahead of analyst day, William Blair says

Investing.com - Block Inc. (NYSE:SQ) received a reiterated Outperform rating from William Blair ahead of the company’s analyst day scheduled for Wednesday. According to InvestingPro data, Block appears significantly undervalued with analysts setting price targets as high as $105, suggesting considerable upside potential from its current price of $58.89.

The research firm maintained its positive long-term view on Block despite acknowledging the company faces "a high bar to clear as it seeks to re-engage investors in a dismal fintech market." William Blair suggested the upcoming analyst day could drive shares higher considering current negative sentiment. This could provide a catalyst for the stock, which has fallen 10.65% in the past week and 30.71% year-to-date.

Block reported 18% year-over-year consolidated gross profit growth in the third quarter, with Cash App expanding 24% and Square growing 9%. The company’s fourth-quarter guidance indicates gross profit growth accelerating to 19% by year-end, placing Block just below the Rule of 40 benchmark. Despite market concerns, Block maintains healthy financials with a current ratio of 2.18, indicating strong liquidity.

William Blair attributed recent stock weakness to concerns over software-integrated POS competition, pricing pressure, variance between Square GPV growth and gross profit, and Cash App’s reliance on short-term liquidity products. Investor concerns also include a $68 million third-quarter in-person corporate event that the firm described as "excessive."

The research firm expects Block to address these concerns partly through additional Cash App financial disclosures and raised medium-term financial targets at the upcoming analyst day.

In other recent news, Block Inc. has launched a campaign advocating for a tax policy change that would exempt small bitcoin transactions from capital gains reporting requirements. The initiative, titled "Bitcoin is Everyday Money," seeks a $600 de minimis tax exemption for goods and services purchased with bitcoin. Meanwhile, Truist Securities has upgraded Block’s stock from Hold to Buy, citing an improved risk/reward profile and setting a new price target of $68.00. TD Cowen reiterated its Buy rating on Block with a $91.00 price target, highlighting the company’s solid momentum in its Cash App and Square businesses. However, Truist Securities also lowered its price target for Block to $67.00, maintaining a Sell rating while slightly increasing gross profit forecasts for the upcoming years. Additionally, Cash App, a part of Block, unveiled a major product update featuring 11 new products and over 150 improvements, including a reimagined benefits program called Cash App Green. These developments come as Block prepares for its upcoming Investor Day.

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