Needham cuts Block stock target to $60, maintains Buy rating

On Friday, Needham adjusted its financial outlook for Block Inc. (NYSE: SQ), reducing the price target to $60 from the previous $90, while still endorsing the stock with a Buy rating. According to InvestingPro data, Block appears undervalued at its current price of $58.48, with the stock down nearly 32% year-to-date. The research firm’s analysts cited a combination of factors influencing their revised valuation, including a weaker-than-expected first quarter performance marked by sluggish Cash App inflows and consumer spending challenges.

Block Inc. reported first-quarter results that revealed certain headwinds, particularly in consumer spending. Despite these challenges, InvestingPro analysis shows Block maintains strong financial health with a current ratio of 2.33 and revenue growth of 10% in the last twelve months. The company’s management provided cautious second-quarter guidance and scaled back its full-year 2025 projections. Needham views these moves as a cautious yet appropriate response to the near-term uncertainty in the market.

Despite the downward revision, Needham sees a silver lining in Block’s consistent international performance and the company’s efforts in rolling out new products and expanding its market reach. The analysts believe that these factors could potentially lead to a rebound in growth during the second half of 2025. This optimism is supported by Block’s solid fundamentals, with InvestingPro data showing a healthy gross profit margin of 37% and analyst consensus remaining strongly bullish. For deeper insights into Block’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

The adjustment in the price target comes as Block’s shares are anticipated to open approximately 20% lower due to the reduced outlook. However, Needham suggests that the current market conditions have already factored in the potential risks for the latter half of the year, and thus, the risk-reward balance is now more favorable for investors.

In their commentary, Needham analysts expressed confidence in Block’s long-term growth prospects. They emphasized that despite the near-term headwinds, the company’s growth trajectory could see a positive inflection later in the year, bolstered by its ongoing product initiatives and market expansion efforts.

In other recent news, Block Inc. has experienced several significant developments. The company reported mixed first-quarter results, with adjusted EBITDA exceeding expectations by 4%, but gross profit falling short by about 1%. This shortfall was primarily due to a slowdown in the Cash App segment. Analysts from Raymond (NSE:RYMD) James, BTIG, and JPMorgan have adjusted their price targets for Block, with Raymond James lowering it to $74, BTIG to $70, and JPMorgan to $60, while maintaining an Overweight rating. BMO Capital Markets and Benchmark also downgraded Block’s stock, with BMO moving it to Market Perform and Benchmark to Hold, both expressing concerns over growth prospects in the Cash App segment.

Block’s management has revised its guidance for 2025, citing a more challenging macroeconomic environment than anticipated. Despite the downward revisions, Block’s management remains cautiously optimistic about future growth, expecting a significant acceleration in gross profit growth in the latter half of the year. Analysts highlight the potential for increased product adoption and revenue synergy between the Cash App and Square segments. However, skepticism remains due to recent performance issues and the conservative nature of the company’s guidance. These developments reflect a period of uncertainty and adjustment for Block as it navigates a complex financial landscape.

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