On Wednesday, Mizuho Securities expressed a positive outlook on Block Inc. (NYSE: SQ), raising its price target on the company's shares to $106 from the previous $99 while reiterating a Buy rating. The firm's analysis indicates that Block Inc. could surpass its 2024 gross profit growth projections due to strategic enhancements in its Cash App and Square ecosystems.
The financial institution has identified several growth levers that could contribute to Block's performance. These include converting approximately one million more Cash Card users to direct deposit, which could increase spending by six times and add around 3% to gross profit growth. Additionally, expanding the Cash App's reach to higher-income users could potentially add another 1% to growth.
Further growth opportunities are seen in the broadening of Cash App's 'Borrow' feature, which is expected to contribute an additional 1% to gross profit growth. Moreover, a recovery in momentum for Square's point-of-sale (POS) systems in the U.S. restaurant industry could also add another 1% to growth. Combining these factors, Mizuho's "blue-sky scenario" suggests that gross profit growth could exceed 20% in 2024, surpassing both the company's guidance of over 15% and the consensus estimate of 16%.
The firm's revised estimates are based on the belief that Block Inc.'s management is refocusing efforts on its key products, which could lead to significant performance improvements. Mizuho's new price target reflects confidence in the company's ability to achieve and potentially exceed its financial targets for the coming year.
InvestingPro Insights
Block Inc. (NYSE: SQ) is capturing the attention of investors and financial analysts alike, as reflected in Mizuho Securities' optimistic price target revision. Supporting this view, InvestingPro data showcases Block Inc.'s robust financial position. The company's market capitalization stands at a solid $49.47 billion, and it has demonstrated a significant revenue growth of 25.01% over the last twelve months as of Q4 2023. Additionally, the company's gross profit margin remains healthy at 34.58% for the same period. These metrics underscore Block's financial resilience and potential for sustained growth.
Looking ahead, the company's stock price has experienced a large uptick over the last six months, with a 70.33% total return, reflecting investor confidence. This aligns with InvestingPro Tips that highlight Block's status as a prominent player in the Financial Services industry, with a strong return over the last three months. Moreover, analysts predict the company will be profitable this year, which is a crucial factor for potential investors. For those seeking comprehensive analysis, there are 11 additional InvestingPro Tips available, providing deeper insights into Block Inc.'s performance and outlook.
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