Block Shares Climb After Analyst Says it is a ‘Premier Large-Cap Growth Franchise’

Block (NYSE: SQ) shares are up more than 3% premarket after Baird analyst David Koning lifted the stock's rating.

In a research note on Tuesday, Koning upgraded the tech firm to Outperform from Neutral, raising the price target to $78 from $62 per share.

He told investors that Block is a “premier large-cap growth franchise with both profitability and net cash.” In addition, the analyst believes Block will benefit from macroeconomic trends such as rising interest rates and inflation, and after its shares declined 61% in 2022, he believes sentiment can improve as Block's growth “should remain good in 2023 and margins ramp.”

Meanwhile, just before the Christmas period, Citi analyst Peter Christiansen lowered the firm's price target on Block to $90 from $135, maintaining a Buy rating on the shares.

Christiansen said in a research note that he believes Block, which was “at all-time lows” on an enterprise value to EBITDA basis, “represents a compelling buying opportunity.”

The analyst said that in 2023 the key for the company will be tighter discretionary spending, efficiency gains, and slower hiring, which has already resulted in a 20% to 25% expense reduction in the last two quarters.

According to TipRanks, out of 27 analysts, 21 have a Buy rating on the stock, with five assigning Block a Hold rating and one a Sell. The average price target of $85.92 represents a potential 36.7% upside.