Here's What Wall St. Experts Are Saying About Block Ahead Of Earnings
Block (SQ) is scheduled to report results of its first fiscal quarter after the market close on May 5, with a conference call scheduled for 5:00 pm EDT. What to watch for:
TARGET CUT AHEAD OF EARNINGS: Jefferies analyst Trevor Williams lowered the firm's price target on Block to $140 from $155 earlier this week, while keeping a Buy rating on the shares as he previewed first quarter results. The Street view on Cash App gross profit in Q1 looks "achievable," with help from Taxes and Instant Deposit pricing, but the view in Q2 and beyond looks "stretched," Williams said. Nonetheless, he expects that any modest reset will to be viewed as a de-risking event ahead of the potential catalyst from the investor day in two weeks.
Late last month, Susquehanna analyst James Friedman also lowered his price target on Block to $160 from $240 and kept a Positive rating on the shares. The analyst told investors that he believed volume read-throughs looked encouraging, but consensus operating expenses may be low. Additionally, he cut his EBITDA estimates and sees downside to consensus on higher operating expenses.
Meanwhile, Credit Suisse analyst Timothy Chiodo lowered the firm's price target on Block to $180 from $190 but kept an Outperform rating on the shares ahead of quarterly results. The analyst continues to believe that there are two dominant business models that will "win" over the coming decade within payments acceptance - either be the software platform or be a preferred partner in embedding and powering additional ecosystem - and monetization-enhancing services. Block, alongside other vertical SaaS platforms, cleanly fits the mold of the former, while others fit the mold of the latter, Chiodo added, arguing that these two modern business models are likely to be of interest to investors once volatility within the sector subsides.
CASH APP TO OFFSET SOME WEAKNESS: On Wednesday, Oppenheimer analyst Dominick Gabriele resumed full coverage of Block with an Outperform rating and $150 price target as he believes consensus metrics appear disjointed and are too low on GP for 2023. Cash App, although scaled in U.S., has room for cross-sell and international expansion helping to offset some weakness likely near-term in average volume per user given debit/stimulus lapping, the analyst contended.
INVESTOR DAY CATALYST: Back in April, Wells Fargo analyst Jeff Cantwell also started coverage of Block with an Overweight rating and $165 price target. The analyst said he expects Block will gain share in both its Square and Cash App businesses and that the company's upcoming investor day on May 18 could be a potential catalyst. Cantwell is also interested in Block's long-term crypto aspirations.
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