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On Monday, Jefferies reiterated its Buy rating on Block Inc. (NYSE: SQ) shares, maintaining a $60.00 price target. According to InvestingPro data, the stock has experienced significant pressure, falling over 20% in the past week and currently trades near its 52-week low of $44.27. The company appears undervalued based on InvestingPro’s Fair Value analysis. The firm’s analyst, Trevor Williams, provided an analysis of Cash App’s performance in the first quarter, noting a deceleration in growth. However, when adjusting for factors such as Bitcoin, foreign exchange, and the Leap Year, Williams observed that the slowdown was substantially less than initially reported—only a 260 basis point decrease compared to the 650 basis points deceleration. Block’s revenue growth remains positive at 4.6% over the last twelve months, with the company maintaining strong liquidity as evidenced by a healthy current ratio of 2.27.
Williams highlighted that credit losses have decreased year-over-year, despite an increase in loan volumes across all products. Specifically, the loss rates for Afterpay, a product offered by Block Inc., showed improvement both quarter-over-quarter and year-over-year. The analyst also estimated that losses from the company’s Borrow service have reduced to approximately 1.5% from around 3% in the fourth quarter of 2024 and about 2% in the first quarter of 2024. This trend is seen as a positive sign ahead of the planned ramp-up in the second half of the year.
Block Inc.’s financial health appears to be strengthening, with the company managing its credit risks effectively as it grows its lending operations. The improvement in Afterpay’s loss rates and the significant reduction in Borrow’s losses contribute to the analyst’s positive outlook on the company’s stock.
The maintained price target and Buy rating by Jefferies suggest confidence in Block Inc.’s strategy and execution. Investors and market watchers will likely keep an eye on the company’s performance in the coming months, particularly in relation to its lending products and how they impact the overall financial picture. InvestingPro reveals analyst targets ranging from $35 to $110, with the overall Financial Health score rated as GOOD. For deeper insights into Block’s valuation and growth prospects, including 13 additional ProTips and comprehensive financial metrics, check out the detailed Pro Research Report available on InvestingPro.
In other recent news, Block Inc. reported financial results that showed a pattern of EBITDA outperforming estimates, although revenue was impacted by Bitcoin value fluctuations. The company’s Gross Profit, particularly from its Cash App segment, fell below forecasts, leading to a revised guidance for FY25. Macquarie downgraded Block from Outperform to Neutral, citing the lower-than-expected Gross Profit and macroeconomic concerns. Seaport Global also downgraded Block from Buy to Neutral, emphasizing significant misses in gross payment volume, gross profit, and earnings per share.
Needham adjusted its price target for Block to $60 from $90, maintaining a Buy rating and noting Block’s international performance and product expansion efforts as potential growth drivers. Meanwhile, BMO Capital Markets downgraded Block to Market Perform, setting a new price target of $58, due to concerns about growth prospects in the Cash App segment. Benchmark downgraded Block from Buy to Hold, removing its price target, and expressed concern over stagnation in Cash App user growth. These developments reflect a cautious outlook from analysts regarding Block’s near-term growth potential amid current economic uncertainties.
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