Judging by the sharp rally in Block Inc. shares, you could say it was a blockbuster quarter for the Square and Cash App parent company.
Blockâs stock
SQ,
was ahead 17% in premarket trading Friday and would log its best day in over 15 months â since it rose 17.8% on Nov. 10, 2022Â â if current gains carried through to the regular session. The payment-technology company showed bottom-line improvement with its latest report and impressed Wall Street with its talk of efficiency.
The companyâs âprogress over the past several months in terms of streamlining itself organizationally, sharpening its focus within its two key businesses Square and Cash App, and becoming hyper-focused on driving profitable growth has been impressive â and we think thereâs more to go,â wrote Seaport Research analyst Jeff Cantwell.
He turned bullish on Blockâs stock after its Thursday afternoon earnings report, cheering managementâs âexcellence in executionâ and the companyâs âcompellingâ margin expansion. Block posted a 28% margin on adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) â up 1,100 basis points from a year before.
âWe think itâs very rare to see that level of operating leverage in the space right now, particularly in the current macro environment, and itâs the key reason which compels us to change our investment thesis on the company,â Cantwell wrote, as he lifted his price target on the stock to buy from neutral. He has a $95 target price on shares.
Benchmark Company analyst Mark Palmer lauded Block as âone of the most compelling stock storiesâ in fintech, in part due to his âexpectation that managementâs focus on controlling expense growth would have a dramatic impact on SQâs profitability.â
Further, Palmer is upbeat about Blockâs work to grow its Cash App mobile wallet and convince more users to try banking services within it.
He pointed to his âbelief that the Cash Appâs ability to serve as a bank-account substitute for millions of unbanked and underbanked consumers, combined with managementâs efforts to boost monetization through price increases, would drive the companyâs top- and bottom-line growth.â
Palmer rates the stock at buy with an $89 target price.
Bernsteinâs Harshita Rawat again commented that Block has started to mirror Meta in finding âreligionâ on operating expenses, helping to pull the name out of a âno-manâs land of not being growthy enough for growth investors or profitable enough for [those focused on growth at a reasonable price].â
Block posted a GAAP profit in its latest quarter, and shares are ânow attractive on GAAPâ metrics, according to Rawat, who noted that they trade at 20 times 2025 earnings per share.
And she found other reasons to cheer the companyâs profit progress. âInterestingly, we find that Cash App is now likely at Square levels of profitability,â she wrote, referring to the Square merchant business. âCash Appâs growth now appears to be margin-accretive vs. margin drag historically.â
Rawat has an outperform rating on the stock, and she upped her target price to $90 from $85 in a Friday report.
Truist Securities analyst Andrew Jeffrey argued that Wall Street wasnât giving the Cash App enough credit given what he deems to be a mistaken view that the Cash app is a peer-to-peer service focused on monetizing through instant deposits of payments to external accounts, rather than one that generates revenue through its internal banking offerings.
âBy contrast, the company highlighted new solutions aimed at driving greater [direct deposits], hence more daily use,â he wrote.
Jeffrey boosted his price target to $100 from $90 late Thursday, while reiterating a buy rating.