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Mizuho analysts upgraded Block (NYSE:SQ) to Buy from Neutral and raised the price target to $93 from the prior $80 per share.
The upgrade move comes just a couple of months after the analysts downgraded SQ to Neutral, citing “stagnating Cash App inflows per user, growing mix of higher risk payday lending, and rising competitive pressures in merchant acquiring.”
While they remain cautious on Cash App revenue growth, the analysts are increasingly more positive about the management’s increased focus on profitability and cost-control.
“Our detailed fixed vs. variable cost analysis shows up to 30% potential upside to SQ’s 2023 EBITDA guide, with 400-500bps further margin growth potential thereafter amid fixed cost leverage and variable cost controls,” they wrote in an upgrade note.
Moreover, Mizuho analysts highlight the company’s efforts to become a one-stop-shop network by connecting the point-of-sale, Cash App & BNPL ecosystems.
“SQ remains uniquely positioned to achieve the ‘holy grail’,” they concluded.
Block shares trade 2.7% higher in premarket Thursday.
