S&P 500 may face selling pressure as systematic funds reach full exposure
Investing.com - Wolfe Research has reiterated an Outperform rating on Block Inc. (NYSE:XYZ) with a price target of $95.00, citing the company’s innovation and technological differentiation. The target aligns with InvestingPro’s analysis, which suggests the stock is currently undervalued, trading at $76.16 with a P/E ratio of 17.95.
The research firm views Block as one of the more innovative companies in its coverage universe, with technology differentiation that should support market share gains across both its Square and Cash App businesses over the long term. This view is supported by Block’s strong financial health score of GOOD from InvestingPro, with a solid current ratio of 2.27 indicating robust operational efficiency.
Wolfe Research acknowledges some uncertainty in Block’s business, particularly in the Square segment, noting that evidence of stability or inflection in Gross Payment Volume (GPV) and Gross Profit (GP) growth remains necessary for the stock to outperform meaningfully over the long run.
The firm believes recent Cash App initiatives, particularly in banking and direct deposit features, have potential to drive significant inflows into Block’s ecosystem, supporting more sustainable growth while possibly exceeding market expectations.
Block anticipates achieving rule-of-40 by fiscal year 2026, driven by adjusted operating income margin expansion, while the integration of Afterpay (APT) into Block’s ecosystems is expected to strengthen the connection between its business segments.
In other recent news, Block Inc. is set to join the S&P 500 index, replacing Hess (NYSE:HES) following Chevron Corp. (NYSE:CVX)’s acquisition of the energy producer. This inclusion is scheduled to take effect before trading begins on July 23. Analysts have responded positively to this development, with Bernstein SocGen Group raising its price target for Block to $90 from $75, while maintaining an Outperform rating. Similarly, JPMorgan increased its price target to $90 from $60, also citing the S&P 500 inclusion as a catalyst for potential investor interest.
Wolfe Research has reiterated its Outperform rating on Block, emphasizing the company’s technological innovation as a key factor for potential market share growth. The research firm highlights Block’s differentiation in its Square and Cash App businesses. Additionally, Cash App has launched a new "pools" feature to facilitate group payment collections, allowing multiple contributors to chip in using various payment methods. These developments underscore Block’s ongoing efforts to expand its offerings and solidify its position in the market.
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