On Friday, Seaport Global Securities revised their rating on Block Inc. (NYSE:SQ), lifting the stock from Neutral to Buy, and established a new price target of $95.00. The upgrade follows Block's recent organizational improvements and financial performance, which have exceeded expectations.
The company, known for its Square and Cash App services, has been commended for its organizational streamlining and focus on driving profitable growth. Block's adjusted EBITDA for the quarter reached a record $562 million, surpassing analyst and street predictions by 25%. The adjusted EBITDA margin also saw a significant increase of 1100 basis points compared to the same quarter last year.
Seaport Global Securities anticipates further operating leverage for Block, as the company maintains its employee count under the 12,000 cap. The growth in gross profit for both Square and Cash App is expected to contribute to this leverage. Additionally, Block's guidance for 2024's adjusted EBITDA of $2.63 billion suggests a year-over-year growth of over 45%, with potential for further growth.
The firm's analysts have adjusted their forecasts for Block's adjusted EBITDA for 2024 and 2025 upwards. They believe that Block is on track to meet its Rule of 40 framework by 2026. The price target of $95 is based on a 16x multiple of the company's projected 2025 enterprise value to EBITDA. The assessment concludes that the risk/reward balance for Block's shares is reasonable, with potential for additional upside.
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