Shares of Block Inc
The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.
- Needham analyst Mayank Tandon maintained a Buy rating, while raising the price target from $80 to $90.
- JPMorgan analyst Tien-tsin Huang reiterated an Overweight rating and price target of $90.
- Stephens analyst Charles Nabhan reaffirmed an Overweight rating and price target of $90.
- Oppenheimer analyst Rayna Kumar maintained a Perform rating on the stock.
The company raised its full-year guidance due to better third-quarter results, but its fourth-quarter outlook was "lighter than expected on both gross profit and EBITDA," the analyst stated. "We believe the softer 4Q guide reflects persistent pressure on Seller GPV growth and higher than expected investments in sales and marketing," he further wrote.
JPMorgan: Block's quarterly results were "solid," but the negative surprise was a reduction in the fourth-quarter guidance, Huang said. Management's preliminary 2025 outlook of at least 15% growth in gross profit "assumes acceleration through the year inclusive of improving Square GPV growth, a critical watch item for investors given underperformance vs. peers and the market," he added.
"With this guide, the execution bar has been set higher for next year," the analyst wrote. While gross profit growth decelerated through the year in 2024, Block will need to "accelerate from a +14% exit rate in FY24, putting its various product, GTM and organizational initiatives to the test for it to achieve similar upside as it has this year," he further wrote.
Stephens: Block's third-quarter beat was driven by expense control, Nabhan said. Cash App's gross profit grew by 21% year-on-year, while Square's gross profit rose 16%, with GPV decelerating to 7.6% year-on-year, from 8% in the second quarter, he added.
The company raised its full-year adjusted operating income by $120 million, which reflected the third-quarter beat, the analyst stated. "Given GP growth/adj op margin of 18%, the outlook equates to 36% on a rule of 40 basis, vs. 35% prior," he further wrote.
Oppenheimer: Block's adjusted EBITDA grew 69% to $807 million and beat consensus of $707 million, but total GPV rose by only 2%, missing Street's 5% estimate, Kumar said. Cash App's GPV contracted by 40%, versus Street's estimate of a 9% decline, while Square's GPV growth of 8% came in-line with expectations, he added.
Investor concerns around the company's slowing top-line growth "were evident in results," the analyst stated. Block seems well-positioned for continued market share gains, but upside potential is limited by its "relatively high exposure to discretionary consumer spend, small businesses and the non-affluent demographic," he further wrote.
Price Action: Shares of Block had declined by 5.52% to $71.08 at the time of publication on Friday.