Block stock rating cut to Market Perform by BMO Capital

On Friday, BMO Capital Markets adjusted its stance on Block Inc. (NYSE: SQ), formerly known as Square Inc (NYSE:XYZ)., by downgrading the stock from Outperform to Market Perform. The firm also set a new price target of $58.00 for the company’s shares. According to InvestingPro data, Block’s stock has experienced significant volatility, with the shares down nearly 19% over the past six months and currently trading at $58.48.

The decision by BMO Capital Markets to downgrade Block’s stock rating follows concerns about the company’s growth prospects, particularly regarding its Cash App segment. Analysts at the firm have expressed reservations about the potential for gross profit growth acceleration, citing recent performance issues with Cash App as a possible sign of a lower growth rate in the future. Despite these concerns, InvestingPro data shows Block maintains a healthy 37% gross profit margin and has achieved 10% revenue growth in the last twelve months.

The revised outlook by BMO Capital Markets also takes into account Block’s guidance for 2025. The firm acknowledged that it had previously overestimated the conservatism in Block’s future guidance and expected that recent reductions in staff would buffer any slight decreases in top-line guidance. Based on InvestingPro’s Fair Value analysis, Block appears to be currently undervalued, with analysts maintaining targets ranging from $35 to $112 per share. For deeper insights into Block’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

BMO Capital’s analysts highlighted their altered expectations in a statement, "We downgrade to Market Perform as we believe XYZ’s anticipated gross profit (GP) growth acceleration may still have risk. We worry that the recent slowdown at Cash App may be indicative of a lower baseline growth rate going forward, and we are now less confident in the medium-term growth potential for Cash App."

The new price target of $58.00 reflects a shift in confidence from BMO Capital Markets regarding Block’s financial performance and market position. The firm’s previous rating suggested a more optimistic view of the company’s ability to outperform market expectations, which has since been reassessed.

In other recent news, Block Inc. reported its first-quarter earnings for 2025, revealing a significant miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $0.56, falling short of the expected $0.98, and revenue came in at $5.77 billion, below the forecasted $6.21 billion. Following these results, Raymond (NSE:RYMD) James adjusted its price target for Block from $103.00 to $74.00, while maintaining an Outperform rating. BTIG also revised its price target to $70 from $110, retaining a Buy rating due to positive factors such as strong results from the Square segment and potential product adoption.

JPMorgan lowered its price target for Block to $60.00, maintaining an Overweight rating, citing weaknesses in the Cash App segment as a contributing factor to the earnings miss. Benchmark downgraded Block’s stock from Buy to Hold, removing the price target due to concerns over stagnation in Cash App’s user growth. Despite these challenges, Block’s management remains optimistic about accelerating growth in the latter half of the year, with expectations of low double-digit growth in the third quarter and mid-teens growth in the fourth quarter. These developments reflect a cautious yet hopeful outlook for Block Inc. as it navigates a challenging financial landscape.

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