On Wednesday, Bernstein SocGen Group maintained a positive stance on Block Inc. (NYSE:SQ), reiterating an Outperform rating and a $120.00 price target for the financial technology company's stock, which currently trades at $94.55.
According to InvestingPro data, analyst targets range from $40 to $125, with the consensus recommendation remaining bullish at 1.86 (on a scale where 1 is Strong Buy and 5 is Strong Sell). The firm highlighted Block's trio of Bitcoin-related endeavors: the Cash App Bitcoin Exchange, a Bitcoin mining hardware project, and Bitkey, a self-custody wallet for Bitcoin which was recently recognized as one of 2024's best inventions by Time magazine.
Despite common misconceptions, the analyst pointed out that Block's gross profit exposure to Bitcoin is relatively minimal, constituting only 3% of its gross profits. Additionally, the company holds approximately 8300 bitcoins on its balance sheet, valued at around $880 million, which represents about 1.5% of its market capitalization. InvestingPro analysis shows Block maintains strong financial health with a current ratio of 2.07, indicating solid liquidity, while delivering impressive revenue growth of 14.75% over the last twelve months.
Block has already begun a partnership with Core Scientific, working on a tailored mining system that includes both hardware and a software development kit (SDK). The analyst projected that, in a favorable market scenario, Bitcoin mining could significantly contribute to Block's operating income in the medium term. This could lead to a reevaluation of the company's market value as it reaffirms its reputation for innovation and new business development.
The firm also named Block as its top pick, citing several potential growth drivers for the stock heading into 2025. These include an expected acceleration in Square (NYSE:SQ)'s Gross Payment Volume (GPV), an approximate 30% growth in EBITDA from continued efficiency improvements, a likely reduction in regulatory scrutiny, and the possibility of inclusion in the S&P index.
The valuation was described as particularly compelling, with Block's stock trading at 26 times its projected 2026 GAAP earnings and with 15% of its market cap in cash. Furthermore, the analyst forecasted that Block could generate an additional $3 to $3.5 billion in cash flow by the end of 2025, which would account for roughly 6% of its market cap.
In other recent news, Block Inc. has been the subject of several analyst upgrades.
Monness, Crespi, Hardt upgraded Block's shares from Neutral to Buy, setting a new price target of $115.00 based on a positive outlook for the company's future performance. BTIG also favored Block shares, setting a new price target of $110.00, while Mizuho (NYSE:MFG) increased its price target from $94.00 to $110.00, reflecting confidence in the company's growth potential.
Block has demonstrated strong financial performance, with a 19% increase in gross profit, reaching $2.25 billion, and an improved adjusted free cash flow of $1.5 billion. The company expects a 14% year-over-year growth for Q4 2024.
On the product development front, Block introduced a new inheritance feature for its Bitkey bitcoin wallet, simplifying the process of transferring digital assets to beneficiaries after the owner's passing.
Looking forward, Block aims to achieve the Rule of 40 by 2026, focusing on mid-teens gross profit growth and a mid-20% adjusted operating income margin.
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