Deutsche Bank has maintained its Buy rating and a price target of $98.00 on shares of Block Inc. (NYSE: SQ), following discussions at the DB Tech Conference.
The conversations included insights into Block's growth strategies, the driving forces behind the success of its Cash App, and the synergy of products and talent within the company.
Block's Cash App is expected to continue its expansion into financial services, which should contribute to its growth. Similarly, Square is anticipated to increase yields through the development of software and banking products.
Despite the normalization of Square's Gross Payment Volume (GPV) and Cash App's progression beyond discrete benefits, the outlook remains positive for both services.
The company's profitability is projected to keep outperforming market expectations, supported by ongoing cost management efforts. Although the scale of outperformance may not match that of recent quarters, the disciplined approach to costs is likely to persist.
The appointment of Nick Molnar, former CEO of Afterpay, as the Head of Sales is seen as a strategic move to invigorate the enterprise and partnership strategy within the Seller ecosystem. This change is part of Block's ongoing efforts to strengthen its business fundamentals.
In other recent news, Block, formerly known as Square, reported a 20% increase in gross profit to $2.23 billion in the second quarter of 2024. The company's Cash App's gross profit also surged by 23% year-over-year to $1.3 billion. Adjusted EBITDA nearly doubled to $759 million, and adjusted operating income increased significantly to $399 million, a leap from $25 million the previous year.
In light of these developments, Block raised its full-year 2024 gross profit guidance to at least $8.89 billion and announced a $3 billion share repurchase program. BofA Securities maintained a Buy rating on Block Inc., with a consistent price target of $82.00, while Mizuho Securities reduced its price target to $94 from the previous $106, maintaining an Outperform rating.
InvestingPro Insights
As Block Inc. (NYSE: SQ) continues to navigate the fintech landscape, recent data from InvestingPro underscores the company's financial dynamics and market sentiment. With a market cap of approximately $40.68 billion, Block is recognized as a prominent player in the Financial Services industry. Analysts have shown confidence in the company's earnings, with 15 analysts revising their earnings upwards for the upcoming period, indicating a positive outlook on profitability.
InvestingPro data highlights a P/E ratio of 58.98, which, when adjusted for the last twelve months as of Q2 2024, stands at 50.97. This is paired with a PEG ratio of 0.1 during the same period, suggesting that the stock may be trading at a low price-to-earnings ratio relative to near-term earnings growth. Furthermore, with a revenue growth of 19.36% over the last twelve months as of Q2 2024, Block demonstrates a strong capacity for increasing its top-line figures.
InvestingPro Tips indicate that Block Inc. is expected to be profitable this year and has been profitable over the last twelve months. Additionally, the company's stock price movements are quite volatile, which may present opportunities for investors with a higher risk tolerance. For those looking to delve deeper into Block's financial health and strategic positioning, InvestingPro offers additional tips and insights.
For readers interested in a comprehensive analysis of Block Inc., including more in-depth financial metrics and expert opinions, there are 10 additional InvestingPro Tips available, which can be accessed by visiting the InvestingPro platform.
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