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On Friday, RBC Capital Markets sustained their optimistic stance on Block Inc. (NYSE: SQ) shares, maintaining an Outperform rating with a steady price target of $110.00. The firm’s analysis underscored the importance of product innovation and go-to-market (GTM) execution as pivotal elements for Block’s performance in the fiscal year 2025. With a current market capitalization of $47.31 billion and trading at $83.04, InvestingPro analysis suggests Block is currently undervalued, aligning with RBC Capital’s bullish outlook.
The commentary from RBC Capital followed Block Inc.’s recent announcement of mixed financial results and a guide that was slightly less robust than anticipated. Despite these factors, RBC Capital expressed confidence in Block’s strategic direction, particularly highlighting the upcoming launch of a new Afterpay-enabled Cash App Card product. This innovation is viewed by management as a potential driver for gross margin improvement.
RBC Capital’s confidence is further bolstered by Block’s ongoing investments in expanding its sales force for the Square ecosystem, aiming to secure more high-value clients. Additionally, increased marketing efforts for Cash App are expected to enhance direct deposit attachments. These initiatives are part of a broader strategy to stimulate gross profit growth throughout the year.
Block Inc.’s focus on product development and market expansion aligns with the company’s long-term growth trajectory, evidenced by its impressive 26.49% price return over the past six months. The forthcoming Cash App Card, enabled by Afterpay, represents a strategic move to integrate payment processing with financial services, potentially creating new revenue streams and enhancing user engagement. InvestingPro subscribers can access 8 additional key insights about Block’s financial health and growth potential.
The RBC Capital report also touched on the company’s commitment to scaling its operations, both in terms of product offerings and market reach. The investment in Square’s sales force is aimed at capturing a larger share of the upmarket segment, while marketing initiatives for Cash App seek to deepen user relationships and drive sustained growth.
In conclusion, RBC Capital Markets’ reiteration of the Outperform rating and $110.00 price target for Block Inc. reflects a belief in the company’s ability to navigate the current market landscape. The analyst’s commentary emphasizes the anticipated positive impact of product innovation and strategic investments on the company’s financial performance in the coming fiscal year. With analyst targets ranging from $40 to $125 and a consensus recommendation of 1.82 (Buy), investors can access comprehensive analysis and detailed metrics through InvestingPro’s exclusive research reports.
In other recent news, Block Inc. reported its fourth-quarter 2024 earnings, which fell short of analyst expectations. The company posted earnings per share (EPS) of $0.71, missing the forecasted $0.86, and reported revenue of $6.03 billion, below the anticipated $6.24 billion. Despite these shortfalls, Block achieved an 18% year-over-year increase in full-year gross profit, totaling $8.89 billion, and a 69% rise in adjusted EBITDA to $3.03 billion. Looking forward, Block aims for a gross profit of at least $10.22 billion in 2025, with plans to enhance growth through product and marketing initiatives.
Keefe, Bruyette & Woods recently revised their outlook on Block, lowering the stock’s price target to $87 from $100 while maintaining a Market Perform rating. This adjustment followed Block’s earnings release and weaker first-quarter guidance, attributed to factors like foreign exchange headwinds and challenging comparisons in its Seller ecosystem. The firm also adjusted its 2025 EPS estimate to $4.60, up from $4.50, due to anticipated rises in gross profit and reduced expenses, but kept the 2026 EPS forecast unchanged at $5.60.
Block’s management remains optimistic about accelerating growth, particularly in the second half of the year, with a focus on product development and market initiatives. Despite some headwinds, the company expects to see improvements in gross payment volume and retention metrics, driven by increased marketing efforts and strategic partnerships. Analysts are closely monitoring Block’s execution of its strategic roadmap and the impact of new product launches on its financial performance.
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