Investing.com — Block shares have risen around 1.7% premarket Monday after Bernstein named the company its "new best idea" for 2025, citing multiple catalysts poised to drive significant growth.
Bernstein analysts raised Block's price target from $90 to $120, reflecting confidence in its improving fundamentals and potential market revaluation.
"Block is our new best idea," Bernstein wrote, highlighting upcoming catalysts such as accelerated growth in Square's Gross Payment Volume (GPV), a key performance indicator, and robust 30% EBITDA growth fueled by efficiency gains.
The firm also noted lower regulatory scrutiny and a possible inclusion in the S&P 500 index as potential tailwinds.
They explain that Square's GPV is expected to accelerate by 2-3 percentage points into 2025, thanks to easing pressures from same-store sales weakness, product enhancements, and new distribution initiatives stemming from partnerships.
"While the competition is intense and Square products will need to continue to iterate (on verticalized offerings), we still see TAM as sizable amongst SMB sellers and also long-runway for growth in banking & software services," the firm added.
Cash App, another critical driver for Block, faces scrutiny over plateauing metrics, but Bernstein sees mid-teens gross profit growth in 2025.
Key initiatives are said to include increased direct deposit penetration, borrowing, and commerce opportunities via Cash App and Afterpay.
"Cash App's low cost to serve and acquire lower-income consumers will drive growth," Bernstein noted.
Profitability is also in focus, with Bernstein noting that Block is maintaining a headcount cap of 12,000, improving operational efficiency, and reallocating resources to sales and marketing.
Additionally, Block's unique position in bitcoin mining, leveraging advanced 3nm chip technology, is said to add long-term optionality and is considered underappreciated.
The company's valuation remains attractive, according to Bernstein, with the stock trading at 25x 2026 GAAP PE. Cash reserves make up 16% of Block's market cap, with $3-3.5 billion in additional cash flow expected through 2025.
"SQ now checks all the boxes for S&P inclusion," Bernstein concluded.
Comments (0)