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Investing.com -- Morgan Stanley upgraded Block Inc to "Overweight" on Wednesday, saying the stock looks attractive due to its low valuation and potential for cost savings.
The firm raised its price target to $67, seeing upside as macroeconomic risks appear to be already reflected in the share price, which is down 32% year-to-date.
The bank believes investor expectations for growth in Square Seller, Block’s merchant business, are low, creating an opportunity for upside.
While some investors expect weak first-quarter results and a possible downward revision to guidance, Morgan Stanley (NYSE:MS) is more optimistic.
Spending trends among small and medium-sized businesses have remained stable in the first quarter, despite some timing-related distortions from weather, Leap Year effects, and tax refunds.
Recent headcount reductions at Block could also help boost profitability, according to Morgan Stanley. The firm’s internal research suggests that Square’s products and services are viewed slightly more favorably by merchants than previously thought, which could support modest growth acceleration.
"We think macro risks are well priced in and near-term results can reassure following headcount cuts & consistent spending," analyst at Morgan Stanley said.
Morgan Stanley now expects Square Seller’s payment volume growth to improve by around three percentage points over 2025, reaching 9%, assuming no major macroeconomic disruptions.
Investor sentiment on Block remains mixed. Some investors worry that a weaker economic backdrop and increased competition could make it harder for the company to grow.
However, others believe the stock has fallen too much and that many of these risks are already priced in.
"Move to OW as we view XYZ as attractive on valuation, particularly given a low bar for growth reacceleration & potential for better-than-expected cost savings," analyst said.