This Block catalyst could send the stock soaring 20%, says analyst

By Emily Bary

BTIG upgrades shares of the Square and Cash App parent company, cheering synergy potential

Block Inc. is a hodgepodge of businesses, but better synergies between them could send the stock soaring.

At least, that's the view of BTIG analyst Andrew Harte, who upgraded Block's stock (SQ) to buy from neutral Tuesday after recently assuming coverage of the name. He has a new $85 price target on shares that's about 22% above current levels.

"Our core investment thesis is focused on SQ's attractive position between the consumer and merchant with its Cash App and Square ecosystems and potential for each segment to become stronger as integrations are built between them," he wrote in a note to clients.

Block investors may have heard this story before. The company, which houses not only the Cash App mobile wallet and Square merchant-processing business, but also the Afterpay buy-now-pay-later platform, has been talking about better integrating its core businesses since at least 2022, notes Harte.

But he thinks the company is "positioning to integrate the segments in a more meaningful way during 2024," keying in on recent commentary from Jack Dorsey, who heads the company. In the company's last shareholder letter, he wrote that there was "finally...a line of sight to seeing more of Square within Cash App," and vice versa.

Harte also likes the outlooks for those businesses on their own.

"We expect Cash App to continue delivering a premier banking substitute and see an attractive runway for growth from increased engagement with existing customers," he wrote, noting that only about 2 million of the company's 55 million monthly active users are using the company's Borrow lending feature.

Meanwhile, he's encouraged that Dorsey is now overseeing the Square merchant unit in addition to running the broader company. "Just as we expect the Cash App ecosystem to continue innovating, we expect the same for Square and think Dorsey's comments that the seller platform will prove to be the company's superpower with 'major unlocks arriving in 2024' entail a focus on driving productivity and enabling growth through banking-related products," Harte wrote.

Block shares were up 1.6% shortly after Tuesday's open.

-Emily Bary

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01-30-24 1001ET

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