By Senad Karaahmetovic
Baird analysts upgraded Block (NYSE:SQ) stock to Outperform with a new price target of $78 per share (up from the prior $62), implying an upside potential of nearly 25%.
They described Block as a “premier large-cap growth franchise with both profitability and net cash, while benefiting from macro trends such as rising rates (on big cash/subscriber funds) and inflation.”
This is despite Block finishing 2022 as Baird’s worst-performing stock (ex-recent IPOs) - down 61% vs S&P down 19%. Block stock is also down almost 80% from an all-time high with analysts noting SQ has been “adequately penalized” by the Street.
“We think sentiment can improve as growth should remain good in 2023 and margins ramp,” they wrote in an upgrade note.
The analysts add that “Street loves a comeback story, particularly one that's a premier large cap growth franchise.”
Among long-term positives for Block, the analysts highlight: Seller solutions is winning market share despite moderating growth, Cash App is a fast-growing financial network, different ecosystem from competition, integration with AfterPay, etc.
Block stock is up about 4% in pre-open Tuesday.