Berenberg analysts initiated Block Inc (NYSE:SQ) at Buy with a $75 price target in a note Tuesday.
The analysts told investors that the pullback in the stock, which is down 17% this year and 34% since the beginning of August, represents a buying opportunity.
"We believe the pullback in Block’s share price represents an attractive entry point for the stock, which is trading at the lowest price-to-forward sales ratio (1.1x consensus FY25E sales) since the company went public in November 2015," wrote the analysts.
They believe Block’s improving outlook for profitability reflects significant operating leverage, while the company is also "poised to benefit from the integration of its Cash App and Seller ecosystems, whose high switching costs promote user retention."
"Owing to the peer-to-peer nature of Block’s Cash App, it should continue to benefit from network effects as it grows, and we believe the app’s function as a bank account substitute is likely to become even more relevant if more banks adopt a defensive stance and lower-income consumers are shut out of the traditional banking system," the analysts added.
Berenberg also believes the meaningful correlation between Block’s share price and Bitcoin price bodes well for the stock ahead of bitcoin halving.