A Bank of America research analyst maintained their buy rating for Block on Friday, more than two weeks after the large fintech announced a reorganization of its internal reporting structures. During this time Block, which is best known for popular payment services Cash App and Square, has refocused on improving its day-to-day execution, especially in the Square business to drive gross payment volume re-acceleration in 2025, according to senior equity research analyst Jason Kupferberg.
Kupferberg wrote in an August 16 note that, under the leadership of CEO Jack Dorsey and new head of Nick Molnar, Square has sharpened its focus on product innovation, sales, marketing and partnership. He penned the note after hosting a virtual investor meeting with Block’s IR team. (Molnar is the co-founder and former co-CEO of Afterpay, which Block acquired in 2022.On Aug. 1, Block promoted Molnar to head of sales, reporting directly to Dorsey. )
“With shares trading at just four times calendar 2025 estimated enterprise value/gross profit and 10 times calendar 2025 estimated enterprise value/EBITDA, we believe that SQ is undervalued and that its high-quality business model is underappreciated,” wrote Kuperferberg, who maintained a Buy rating and an $82 price objective.
Earlier this month, Block reorganized the entire company by function and disbanded its business unit reporting structure, according to an Aug. 1 shareholder letter from Dorsey and CFO Amrita Ahuja that was reported by Fortune. The reorganization came after the fintech laid off 1,000 Block employees earlier this year. Shares of Block have dropped 24% since hitting a 52-week high of $85.72 in March. The stock on mid-day Friday traded at $64.97, up 72 cents.
Block, however, is showing progress. The company is on track to hit the “Rule of 40” by 2026, which describes corporate financials that achieve a gross profit of around 15% plus about 25% in adjusted operating income. “The total of those numbers is expected to be 35 in 2024, so they are demonstrating nice progress,” Kupferberg said in an email to Fortune.
Cash App also continues to execute on its “bank the base strategy” which is driven by cross-selling additional banking products and buy-now-pay-later to its existing customer base with the goal of becoming their primary banking relationship, Kuperferberg said.
Cash App offers benefits for direct deposit, including a savings account with a 4.5% annual percentage yield. It also offers Cash App borrow, which are four-week loans, of up to $200, that need to be repaid during that time frame. (Cash App charges a flat 5% fee.) Cash App Borrow has seen “robust growth, up three times year over year to $2 billion plus originations in the second quarter, with strong repeat usage and manageable loss rates (less than 3%),” Kuperferberg said in the note.
