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Friday - Seaport Global Securities has downgraded Block Inc. (NYSE: SQ) from ’Buy’ to ’Neutral’ following the company’s disappointing first-quarter results and reduced full-year guidance. The downgrade comes as Block’s stock has declined over 31% year-to-date, according to InvestingPro data. Seaport Global’s analyst noted significant misses in gross payment volume (GPV), gross profit, adjusted operating income, and earnings per share (EPS). Despite these challenges, Block maintains a "GOOD" overall financial health score, with particularly strong liquidity metrics. The Cash App was specifically highlighted as a main concern.
The updated guidance for the year 2025 also presents a challenge for Block, as achieving the Rule of 40—a financial metric indicating a balance of growth and profitability—is now unlikely, with the current forecast at 31%. While Block maintains a healthy revenue growth of 10% and a gross profit margin of 37%, the outlook for 2026 remains uncertain in the current economic climate. The analyst expressed skepticism regarding Block’s expectation for growth acceleration in the latter half of the year for both Square and Cash App. For deeper insights into Block’s financial health and growth prospects, InvestingPro subscribers can access comprehensive analysis and additional metrics.
The report stated that Block’s stock has already begun to react to the unexpected quarterly results and lowered guidance, raising questions about whether investors should buy the stock on the dip. However, Seaport Global advises caution, suggesting there could still be potential for further declines in Block’s performance this year, even with the company’s conservative stance on its new guidance.
In conclusion, Seaport Global has withdrawn its previous recommendation to buy Block stock. The firm has taken a step back due to the recent guidance cut, which undermines their former investment thesis. The analyst’s final comment was clear: "Block simply is not an investable story to us at the moment, and we head to the sidelines."
In other recent news, Block Inc. reported first-quarter results that revealed challenges in consumer spending and Cash App inflows, leading to a cautious second-quarter guidance and a scaled-back full-year 2025 projection. Following these developments, several financial firms adjusted their outlooks on Block. Needham reduced its price target to $60, maintaining a Buy rating, citing international performance and new product rollouts as potential growth drivers for the second half of 2025. BMO Capital Markets downgraded Block from Outperform to Market Perform, setting a new price target of $58, due to concerns about Cash App’s growth potential. Benchmark also downgraded Block from Buy to Hold, removing its price target amid concerns over stagnating Cash App user growth.
Raymond (NSE:RYMD) James maintained an Outperform rating but cut the price target to $74, acknowledging mixed financial results with adjusted EBITDA exceeding expectations but gross profit falling short. BTIG adjusted its price target to $70, maintaining a Buy rating, despite a significant slowdown in Cash App activity. The analyst emphasized Block’s strong first-quarter results from the Square segment and potential for increased product adoption as reasons for optimism. These recent developments reflect a cautious outlook on Block’s financial performance, with analysts expressing varied confidence levels in the company’s growth prospects.
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