New Street Research has initiated coverage on shares of Block Inc. (NYSE: SQ) with a Neutral rating and set a price target of $70.00.
The firm outlined a potential path to success for the financial services and mobile payment company, emphasizing the role of co-founder Jack Dorsey in addressing operational challenges and driving growth.
According to New Street Research, Dorsey's return to the company could lead to a strategic turnaround for Block, particularly for its Square services. The firm highlighted the importance of reversing market share losses and seeking merchant growth to foster a more balanced ecosystem that includes both Square and the Cash App.
The analyst noted that the Cash App risks becoming "just another wallet" without additional consumer utility. Structural challenges such as potential declines in instant deposit fees and competition from a resurgent Venmo were also mentioned as headwinds for the company.
The report suggested that Square's significant improvements are not expected until early 2025. It mentioned ongoing trials of new initiatives like local and food & beverage flywheel trials as being in the early stages. The integration of Buy Now, Pay Later (BNPL) features into the Cash App card is anticipated by the end of the year, which could contribute to the company's narrative in 2025.
In other recent news, Block reported significant growth in its Q2 earnings. Gross profit rose to $2.23 billion, a 20% increase from the previous year, and Cash App's gross profit surged 23% year-over-year to $1.3 billion. Adjusted EBITDA nearly doubled to $759 million, and adjusted operating income increased significantly to $399 million.
These recent developments prompted Block to raise its full-year 2024 gross profit guidance to at least $8.89 billion and announce a $3 billion share repurchase program. Deutsche Bank (ETR:DBKGn) and BofA Securities have maintained their Buy ratings on Block, with price targets of $98.00 and $82.00, respectively. However, Mizuho Securities reduced its price target to $94 from the previous $106, while still maintaining an Outperform rating.
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