Block Stock Gains as Baird Upgrades to Outperform, Anticipating Nearly 25% Upside

By Senad Karaahmetovic

Analysts at Baird have upgraded Block’s stock to an Outperform rating, setting a new price target at $78 per share, an increase from the previous target of $62. This adjustment suggests an upside potential of nearly 25%.

The analysts characterized Block as a "premier large-cap growth franchise" that is profitable and holds significant net cash. Additionally, they noted that the company is benefiting from macroeconomic trends such as rising interest rates and inflation, particularly related to large cash reserves and subscriber funds.

This positive outlook comes despite Block’s performance in 2022, where it was recognized as Baird’s poorest-performing stock (excluding recent IPOs), experiencing a 61% decline, while the S&P index fell by 19%. Currently, Block’s stock is down nearly 80% from its all-time high, with analysts commenting that the stock has been "adequately penalized" by the market.

The analysts expressed optimism, stating, "We believe sentiment can improve as growth prospects remain strong for 2023 and margins continue to expand." They also pointed out that the market tends to favor comeback stories, especially from a distinguished large-cap growth entity.

Long-term positives identified for Block include the company’s ability to gain market share in seller solutions despite slower growth, the rapid expansion of Cash App as a financial network, its unique ecosystem that sets it apart from competitors, and its integration with AfterPay.

As a result of the upgrade, Block’s stock saw an increase of approximately 4% in pre-market trading on Tuesday.