Block stock rating lifted to High-Conviction Outperform by CLSA

On Tuesday, CLSA analysts raised their outlook on Block Inc. (NYSE: SQ) stock, upgrading it from Outperform to High-Conviction Outperform, while keeping the price target steady at $112.00. This target represents significant upside potential from the current price of $54.33. According to InvestingPro data, Block appears undervalued, with analysts’ consensus remaining bullish at 1.67 (Strong Buy). The firm’s analysts cited several factors that contribute to this optimistic view despite recent market challenges faced by Block Inc.

The analysts pointed out that Block’s shares had been under pressure due to concerns about the US consumer market, with the stock down 36% year-to-date and trading near its 52-week low of $52.25. However, they believe that the current weakness presents a chance for Block to outperform in the short term and achieve significant gains in the long run. The upgrade is supported by a combination of growth initiatives showing early signs of success, with revenue growing at 10% over the last twelve months, a commitment to achieving a balance of revenue growth and profit margins known as the Rule of 40, and a compelling value proposition to merchants and consumers during tough economic times.

CLSA’s analysts emphasized Block’s ongoing growth initiatives as a key element for potential upside. They noted that there is already early evidence of meaningful traction in these areas. Moreover, the firm has opportunities to adjust its selling, general, and administrative expenses (SG&A) to maintain margins if the anticipated revenue growth does not materialize as expected.

The analysts also highlighted Block’s value proposition, which they believe is particularly strong during periods of economic hardship. This is because Block provides tools and services that can help merchants and consumers navigate challenging financial environments more effectively.

Finally, the analysts remarked on Block’s valuation, which they described as being at an all-time low, with a 12.1x enterprise value to EBITDA (EV/Ebitda) ratio. The company maintains strong fundamentals with a healthy current ratio of 2.33 and an Altman Z-Score of 3.16, indicating solid financial stability. This valuation, combined with the factors mentioned above, led to the decision to upgrade Block’s rating to High-Conviction Outperform and maintain the $112 price target. For deeper insights into Block’s valuation and 12+ additional exclusive ProTips, visit InvestingPro, where you’ll find comprehensive analysis and the detailed Pro Research Report.

In other recent news, Block Inc. has been the subject of several analyst reports and strategic developments. BMO Capital Markets maintained its Outperform rating with a price target of $89, citing potential cost savings from recent layoffs, which could improve the company’s adjusted operating income by over 10% for 2025. Keefe, Bruyette & Woods also upheld their Outperform rating with an $80 target, noting that the layoffs might enhance Block’s investment flexibility, particularly in sales and marketing. Meanwhile, KeyBanc Capital Markets adjusted its price target for Block to $85 from $115, highlighting a softer revenue outlook for small and medium-sized businesses but maintaining an Overweight rating.

Additionally, Block announced the launch of Cash App Afterpay, expanding its Pay-in-4 access and integrating Afterpay’s services with Cash App’s vast user base. This new development aims to increase payment flexibility for customers and merchants alike. BTIG maintained a Sell rating on Block with a $110 price target, despite acknowledging the strategic benefits of Block’s subsidiary, Square Financial Services, receiving FDIC approval to extend consumer loans. The approval allows Block to offer its Cash App Borrow feature nationwide, which could enhance its gross profit and operating margins in the coming years. These recent developments reflect Block’s ongoing efforts to optimize operations and expand its financial services offerings.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.