On Monday, KeyBanc maintained its positive stance on Block Inc. (NYSE: SQ), reiterating an Overweight rating alongside a $95.00 price target. The firm's analysis follows Block's announcement of new integrations and a significant distribution partnership aimed at enhancing its Square seller services within the beauty and wellness industry.
Block revealed a new alliance with SalonCentric, the leading beauty product B2B distributor in the United States, boasting over one million active customers and more than 600 stores across the country. This partnership enables sellers to acquire the Square Reader at SalonCentric locations and receive special pricing for Square Appointments Plus with their purchase.
Furthermore, Square has introduced new features and product enhancements designed to help sellers in the beauty and wellness sector increase sales, personalize their services, and streamline back-office operations. These updates are part of Block's broader strategy to reinvigorate its seller acquisition process by leveraging industry partnerships.
The partnership with SalonCentric is the latest in a series of collaborations, including those with U.S. Foods through the CHECK Business Tools program, Performance Foodservice, and the state restaurant associations of Illinois, California, and New York. KeyBanc views these initiatives as pivotal in reigniting Square's seller acquisition engine, especially following the recent completion of the Orders migration.
According to KeyBanc, while the impact of the recent partnerships and integrations may not be immediate, they represent an important step in the turnaround efforts for Square's seller acquisition. The firm believes that these moves offer a fast track to expanding the platform's functionality and underscore Block's commitment to executing its strategic plans.
In other recent news, Block Inc. has been the subject of various analyst updates and strategic developments. Block's Q2 earnings reflected a 20% growth in gross profit to $2.23 billion, with Cash App's gross profit increasing by 23% year-over-year to $1.3 billion. The company's adjusted EBITDA nearly doubled to $759 million, and adjusted operating income rose to $399 million.
Jefferies maintained a Buy rating on Block and increased its stock price target to $90, driven by expectations of a higher gross profit. Meanwhile, Lyft (NASDAQ:LYFT) integrated Cash App Pay to expand payment options for its ride-hailing services, aiming to cater to younger consumers' financial preferences.
Analyst firms, including Wolfe Research, Deutsche Bank, BofA Securities, and Mizuho Securities, reiterated their positive ratings on Block. However, New Street Research initiated coverage on Block shares with a Neutral rating, emphasizing the need to reverse market share losses and foster a balanced ecosystem.
Block also launched a new Orders Platform to offer expanded commerce capabilities to U.S. sellers. KeyBanc reiterated an Overweight rating on Block, stating that the platform strengthens Square's competitive edge, particularly in the restaurant and service sectors.
InvestingPro Insights
Block Inc.'s strategic moves in the beauty and wellness sector align well with its financial performance and market position. According to InvestingPro data, Block has a market capitalization of $45.65 billion and has shown strong revenue growth of 19.36% over the last twelve months as of Q2 2024. This growth trajectory supports KeyBanc's optimistic outlook on the company.
InvestingPro Tips highlight that Block is expected to grow its net income this year and is trading at a low P/E ratio relative to near-term earnings growth. These factors suggest that the company's new partnerships and integrations could potentially translate into improved financial performance.
The company's liquid assets exceed short-term obligations, indicating a solid financial position to support its expansion strategies. Additionally, Block's high return over the last year, with a 69.76% price total return, reflects investor confidence in the company's direction.
For investors seeking a deeper understanding of Block's potential, InvestingPro offers 11 additional tips, providing a comprehensive analysis of the company's financial health and market position.
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