On Monday, financial services company Block Inc. (NYSE: SQ) received an optimistic update from Jefferies, as the firm increased its stock price target to $90 from $80 while maintaining a Buy rating on the stock. The adjustment reflects expectations of a gross profit surpassing initial predictions, primarily driven by the performance of Block's Cash App.
The analyst from Jefferies anticipates that the company will report an adjusted EBITDA beat and potentially raise its outlook, even as it continues to invest in growth. This projection hinges on the assumption of a modest gross profit beat, which could be seen as a positive outcome, especially if U.S. Gross Payment Volume (GPV) remains stable. Stability in GPV would be considered a victory in light of a potential market-level slowdown in the third quarter.
Block Inc.'s valuation was also a subject of the analyst's commentary. The firm updated its Sum of the Parts (SoTP) framework, which suggests that the current stock valuation is attractive. This is despite the expectation that a significant acceleration in GPV, which could lead to a re-rating of the stock, may not occur until 2025.
The analyst expressed confidence in the long-term prospects for a GPV acceleration, which is seen as a key factor for a potential re-rating of the company's shares. The current valuation, according to the analyst, compensates for the absence of near-term catalysts that could drive the stock price significantly higher in the short term.
Block Inc., known for its popular payment platform Cash App, has been closely watched by investors for signs of growth and profitability. With Jefferies reiterating a Buy rating and raising the price target, the market's attention may be drawn to the company's upcoming financial performance and strategic investments.
In other recent news, Block Inc. has reported a substantial 20% growth in gross profit to $2.23 billion in its Q2 earnings, with a notable 23% year-over-year increase in Cash App's gross profit to $1.3 billion. The company's adjusted EBITDA nearly doubled to $759 million, and adjusted operating income rose to $399 million.
In other company news, Lyft (NASDAQ:LYFT) has integrated Cash App Pay to expand payment options for its ride-hailing services, targeting the financial preferences of younger consumers. This partnership is expected to provide more flexibility and convenience to Lyft's customers.
In analyst news, Wolfe Research reiterated its Outperform rating for Block, highlighting the company's innovative edge and potential for long-term market share growth. Deutsche Bank (ETR:DBKGn) and BofA Securities maintained their Buy ratings on Block, while Mizuho Securities kept an Outperform rating despite reducing its price target.
New Street Research initiated coverage on Block shares with a Neutral rating, emphasizing the importance of reversing market share losses and fostering a balanced ecosystem.
Block has also launched a new Orders Platform, offering expanded commerce capabilities to U.S. sellers. KeyBanc reiterated an Overweight rating on Block Inc., emphasizing that the platform bolsters Square (NYSE:SQ)'s competitive edge, particularly in the restaurant and service sectors. These are recent developments for both Lyft and Block Inc.
InvestingPro Insights
Recent data from InvestingPro adds depth to Jefferies' optimistic outlook on Block Inc. (NYSE: SQ). The company's market cap stands at $46.02 billion, reflecting its significant presence in the financial services sector. Block's revenue growth of 19.36% over the last twelve months as of Q2 2024 aligns with the analyst's expectations of strong performance, particularly from Cash App.
InvestingPro Tips highlight Block's financial health and growth potential. The company's net income is expected to grow this year, supporting Jefferies' prediction of an adjusted EBITDA beat. Moreover, Block is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.12, suggesting potential undervaluation – a point that resonates with the analyst's view on attractive valuation.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips that could provide further insights into Block's financial position and market performance.
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