Microvast Holdings announces departure of chief financial officer
On Friday, BMO Capital Markets adjusted its price target for Block Inc. (NYSE:SQ), formerly known as Square, reducing it from $89.00 to $80.00, while sustaining an Outperform rating on the shares. According to InvestingPro data, Block currently trades at $51.65, with analysts' targets ranging from $40 to $125, suggesting significant potential upside. The stock has experienced notable volatility, declining nearly 38% year-to-date. The adjustment follows BMO Capital's assessment that Block's first-quarter performance may not meet market expectations due to a modest deceleration in gross profit growth. Despite these concerns, Block maintains strong fundamentals with a healthy gross profit margin of 37% and a current ratio of 2.33, indicating solid liquidity. InvestingPro analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report.
Rufus Hone, the analyst from BMO Capital, noted that their first-quarter projections are slightly below the consensus due to this anticipated lower gross profit growth. However, for the full fiscal year 2025, BMO Capital's estimates are slightly above the Street's expectations. This positive outlook for the year is partly due to the cost savings from the company's first-quarter layoffs, which impacted approximately 8% of Block's workforce.
Despite a softer first quarter, BMO Capital expects Block to pick up the pace in the second half of 2025. This anticipation is based on a significantly easier comparison year-over-year and an increase in sales and marketing/research and development spending, estimated to save around $250 million following the recent layoffs. Block's revenue growth remains robust at 10%, with InvestingPro data showing a strong five-year revenue CAGR of 39%. The company maintains a solid financial health score, suggesting resilience through market cycles.
The analyst also highlighted Block's strategic position to benefit from gross profit and gross payment volume growth, driven by product innovations, enhancements in distribution, and a revamped sales strategy. Furthermore, BMO Capital forecasts that the Cash App's average revenue per user (ARPU) will continue to see robust growth throughout fiscal year 2025. This growth is expected to be fueled by strong performance from various features, including Cash App Borrow, buy now, pay later (BNPL) options, Cash App Pay, and Afterpay integration with the Cash App Card, all contributing to a significant acceleration in gross profit.
In other recent news, Block Inc. has agreed to pay a $40 million fine to settle allegations of significant anti-money laundering compliance failures on its Cash App platform. This settlement, announced by New York's financial services regulator, includes the appointment of an independent monitor to oversee improvements in Block's compliance program. Meanwhile, Evercore ISI has set a price target of $52 for Block's stock, citing growth potential in its Square and Cash App segments, although they maintain a cautious outlook due to macroeconomic uncertainties. Bernstein has adjusted its price target for Block to $85, emphasizing potential growth drivers such as increased Gross Payment Volume and operational efficiency gains. CLSA has upgraded Block's stock rating to High-Conviction Outperform, maintaining a price target of $112, supported by early signs of success in growth initiatives and a strong value proposition during economic challenges.
Additionally, BMO Capital Markets continues to hold an Outperform rating with an $89 price target, noting that recent layoffs could lead to significant cost savings and boost adjusted operating income. The layoffs are part of Block's strategy to streamline operations and improve financial performance, potentially offering a 12% upside to the Street's expectations for adjusted operating income in 2025. However, BMO Capital highlighted that investor skepticism remains about Block's ability to accelerate gross profit growth as projected. These developments reflect the diverse perspectives of analysts on Block's financial outlook and operational strategies.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.