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Investing.com - Morgan Stanley (NYSE:MS) downgraded Block Inc. (NYSE:XYZ) from Overweight to Equalweight on Tuesday, maintaining a price target of $73.00. The fintech giant, with a market capitalization of $46.47 billion, currently maintains a "GOOD" financial health rating according to InvestingPro analysis.
The downgrade comes as Block shares have risen 63% since their May 2 trough, now trading at $76, which Morgan Stanley considers a fair valuation at 21 times 2026 price-to-earnings ratio. The stock currently trades at a more modest 18.1x trailing earnings, with notably high price volatility indicated by its beta of 2.71.
Morgan Stanley believes most of the anticipated acceleration in Square and Cash App growth is already built into market expectations and notes that Block is a "crowded long" position ahead of second-quarter earnings.
The firm acknowledges Block is making "solid progress" on product enhancement and go-to-market efforts in its Square Seller business, as evidenced by small and medium business survey data.
Morgan Stanley expressed concerns that Cash App’s low-income customer demographic limits volume and monetization potential, suggesting Block will rely more on credit expansion, including short-term Borrow loans, to support durable double-digit gross profit growth.
In other recent news, Block Inc. has received significant attention from analysts and investors. Wolfe Research reiterated its Outperform rating on Block, setting a price target of $95, emphasizing the company’s technological innovation as a driver for potential market share growth in its Square and Cash App businesses. Meanwhile, Bernstein SocGen Group and JPMorgan both raised their price targets for Block to $90, citing its upcoming inclusion in the S&P 500 as a factor that could attract increased investor interest. This inclusion is expected to occur on July 23, potentially boosting Block’s visibility among long-only investors.
Additionally, Block’s Cash App introduced a new "pools" feature, simplifying group payments by allowing multiple contributors to chip in using various payment methods like Cash App, Apple (NASDAQ:AAPL) Pay, or Google (NASDAQ:GOOGL) Pay. Users can create dedicated payment pools, set target amounts, and track contributions in real time. These developments underscore Block’s ongoing efforts to innovate and expand its offerings in the financial technology space.
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