JFrog stock rises as Cantor Fitzgerald maintains Overweight rating after strong Q2
On Friday, Keefe, Bruyette & Woods adjusted their outlook on Block Inc. (NYSE:XYZ), decreasing the price target to $87.00 from the previous $100.00, while maintaining a Market Perform rating on the company’s shares. The adjustment follows Block’s fourth quarter earnings release, which prompted the firm to revise its earnings per share (EPS) estimate for 2025 to $4.60, up from $4.50, reflecting an anticipated rise in gross profit and reduced expenses. However, the 2026 EPS forecast remains unchanged at $5.60.
The firm’s decision to modify the price target was influenced by an applied valuation multiple of approximately 11 times the enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) based on their 2026 EBITDA estimates. This change comes amid a weaker first-quarter guidance from Block, which the company attributes to several factors including the leap-year effects, foreign exchange headwinds in its Seller ecosystem, challenging comparisons due to Square Banking-related revenues, and the lapping of Bitcoin pricing initiatives in its Cash App. InvestingPro analysis reveals Block’s current P/E ratio stands at 48.75, with a strong financial health score of 2.57 (rated as GOOD), suggesting resilience despite near-term challenges.
Despite these headwinds, Block’s management has expressed confidence in the company’s ability to accelerate growth throughout the year. They believe that product and marketing initiatives will drive stronger momentum, particularly in the second half of the year. Keefe, Bruyette & Woods noted that while full-year expectations align with preliminary forecasts, the anticipated acceleration of gross profit is more second-half weighted than the market had initially expected.
Additionally, the firm pointed out that on an adjusted basis for foreign exchange and leap-year impacts, the growth in gross payment volume (GPV) is projected to slow down slightly to high single digits. This suggests a delay in the evidence of market share recovery in the Seller segment. Despite these challenges, Block’s management remains optimistic about the potential for acceleration throughout the year. The company maintains strong liquidity with a current ratio of 2.07, and InvestingPro data indicates net income is expected to grow this year, supporting management’s positive outlook.
In other recent news, Block Inc. reported its fourth-quarter 2024 earnings, which fell short of market expectations. The company announced an earnings per share (EPS) of $0.71, missing the forecasted $0.86, while its revenue was $6.03 billion, below the anticipated $6.24 billion. Despite these quarterly setbacks, Block saw an 18% increase in full-year gross profit, reaching $8.89 billion, and a 69% rise in adjusted EBITDA to $3.03 billion. Looking ahead, Block has set a gross profit target of at least $10.22 billion for 2025.
Block’s strategic roadmap includes significant investment in marketing and product development. The company plans to increase marketing spend by 20% and expects adjusted operating income of $2.1 billion. During a recent earnings call, CEO Jack Dorsey emphasized the company’s commitment to growth and innovation, highlighting initiatives in AI automation and Bitcoin infrastructure. Additionally, Block’s Cash App and Square segments are expected to drive future growth, with Cash App’s borrow and Afterpay features being key focus areas.
Analysts have noted the company’s strong full-year performance but expressed concerns over the missed quarterly targets. The financial technology firm is also exploring new opportunities in Bitcoin mining, with plans to roll out new systems this year. Despite the challenges, Block remains optimistic about its growth trajectory and strategic initiatives for 2025.
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