Block Inc Coverage Initiated by Piper Sandler

Investing.com – Analysts at Piper Sandler have assumed coverage of shares of Block Inc (NYSE:SQ) with an Overweight rating and a $83 price target following the payment company’s Q3 results last week. On Monday, SQ shares were trading at $79.59, up 6.74% since Friday’s close.

Last week, Block reported Q3 earnings per share (EPS) of $0.88, in line with consensus estimates, and revenue of $5.98 billion, missing expectations of $6.24B.

Despite this, the analysts note the company’s impressive margin results. “SQ posted top line results that came in softer than expected during the third quarter… Conversely, Block achieved adjusted EBITDA results that came in much healthier than expected,” Piper Sandler observed.

The firm’s price target is based on a 19x CY25E EPS estimate. Block, with “a robust track record” of innovation, is expected to continue to innovate in the software-enabled payment ecosystem.

“We believe that Block should benefit from a continued secular shift to electronic payments, as well as being on the forefront of innovation, organized around its two business segments: merchants/sellers (Square) and consumers (Cash App),” the analysts stated.

Business Segments

• Square: Represents 34% of Q3 revenues, with 12% growth (FY23) and 47% gross margins (Q3). It has “significant runway for growth” with an addressable market size of $130B+. Analysts will focus on gross payment volume (GPV), revenue growth, and margin profile.
• CashApp: Represents 66% of revenues, 33% growth, and 33% gross margins, with an addressable market size of $75B+. The focus will be on revenue growth, margin profile, and active user dynamics.

“In our view, with these scaled ecosystems, Block has a unique opportunity to cross-pollinate its offerings between its business and consumer ecosystems. The company has made investments to unlock this opportunity, including its Afterpay (BNPL) acquisition. Moreover, we believe that its early entry into Bitcoin could provide it upside in an emerging ecosystem,” the firm added.