On Friday, BMO Capital Markets adjusted their outlook on Block Inc. (NYSE: SQ), the financial services and mobile payment company, by increasing the price target to $93 from the previous $92 while maintaining an Outperform rating on the stock.
The firm's analysis highlights Block's rapid advancement towards its 2026 financial goals, notably the "Rule of 40," which is a benchmark for tech companies that balances growth and profitability.
BMO Capital notes that concerns over the slowdown in Square's Gross Payment Volume (GPV) growth have been a significant concern for investors. However, the company has been actively addressing the issues within its Square ecosystem, improving product offerings, reliability, customer onboarding, and distribution channels.
According to BMO Capital, these improvements are anticipated to accelerate GPV growth by 2025. Additionally, the Cash App platform is expected to gain from increased product development speed and maintain strong momentum leading into 2025.
Block's second-quarter earnings surpassed both its own forecasts and consensus estimates, largely driven by Bitcoin-related transactions. Despite this, revenue and Gross Payment Volume (GPV) fell short of expectations.
Macquarie maintained its Outperform rating on Block Inc. shares, noting strategic marketing moves and personnel changes that could signal a potential reorganization.
Block has raised its annual adjusted core earnings forecast to at least $2.90 billion, up from the previously projected $2.76 billion, citing robust consumer spending as a contributing factor.
The company also expanded its share buyback program with an additional $3 billion, reflecting confidence in its financial performance. This comes after the completion of its previous $1 billion repurchase plan.
InvestingPro Insights
Block Inc. (NYSE:SQ) has shown promising signs according to recent InvestingPro data, with a market capitalization of $36.91 billion and a notable revenue growth of 23.28% over the last twelve months as of Q1 2024. The company's ability to exceed short-term obligations with its liquid assets is an encouraging sign of financial health. Furthermore, Block Inc. is trading at a low P/E ratio relative to its near-term earnings growth, which could indicate an attractive valuation for investors considering its growth prospects.
InvestingPro Tips suggest that Block Inc. is expected to be profitable this year, a sentiment echoed by analysts, and it has been profitable over the last twelve months. The company is a prominent player in the Financial Services industry, and while the stock price movements have been quite volatile, it has delivered a high return over the last decade. For investors seeking additional insights, there are 9 more InvestingPro Tips available at https://www.investing.com/pro/SQ, offering a deeper dive into Block Inc.'s financial metrics and market performance.
The revised price target by BMO Capital Markets aligns with the positive trends observed in the InvestingPro data, reinforcing the potential for Block Inc. to achieve its financial goals and continue its growth trajectory in the fintech sector.
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