XYZ: Medium Term Margin Expansion Will Drive Renewed Upside Momentum This Year

Analysts nudged their blended price target for Block modestly higher to around $88 per share, citing a clearer medium term growth roadmap, improving profitability expectations, and confidence in the company’s ability to sustain robust gross profit expansion despite near term volatility in Square trends.

Analyst Commentary

Street research around Block remains divided, but the overall tone is cautiously constructive, with bullish analysts largely focused on the company’s medium term growth algorithm and margin trajectory, while more skeptical voices emphasize execution risk and elevated expectations in the near term.

Bullish Takeaways

• Bullish analysts highlight a clearer medium term growth roadmap, citing recent Investor Day deep dives into product, underwriting and go to market capabilities as supportive of a more durable, scalable profit algorithm.
• Several positive notes emphasize Block’s accelerating topline momentum and expanding profitability, arguing that the combination supports a premium growth multiple heading into 2026 despite recent share price volatility.
• New and refreshed Buy initiations point to improved execution across both Square and Cash App, with field sales expansion, engineering strength and Afterpay driven monetization viewed as key drivers of sustained gross profit growth.
• Some bullish analysts argue that payments and fintech rotation has been indiscriminate. They see this as creating an opportunity for Block as one of the few names with both visible growth and the potential for modest operating margin expansion over the mid term.

Bearish Takeaways

• Bearish analysts underscore that recent quarters have missed high expectations, particularly around Square gross profit growth, which has decelerated instead of re accelerating, raising questions around near term execution and business mix.
• Price target cuts from more cautious firms reflect concern that guidance, while nominally raised, is only in line with consensus and therefore insufficient to justify prior valuation levels after a strong run in the shares.
• More skeptical voices argue that tough year over year comparisons and potential for softer Q4 guidance could cap upside to estimates, limiting multiple expansion even if results remain broadly solid.
• A minority of analysts maintain structurally negative views, citing what they see as an unfavorable risk reward skew given lingering volatility in seller economics, competitive intensity and a still demanding growth narrative embedded in the stock.

What's in the News

• Block expanded its share repurchase authorization by an additional $5 billion, bringing the total buyback program to $9 billion. This signals confidence in long-term cash generation and shareholder return capacity (Key Developments).
• Cash App launched its most significant product expansion to date, adding flexible banking benefits via Cash App Green, expanded access to Cash App Borrow, integrated Afterpay features, stablecoin transfers, and an AI powered Moneybot assistant to deepen engagement and monetization (Key Developments).
• Square introduced Square Bitcoin, a fully integrated bitcoin payments and wallet solution that lets sellers accept bitcoin with no processing fees for the first year and automatically convert card sales into bitcoin, extending Block's crypto ecosystem for merchants (Key Developments).
• Block announced a comprehensive partnership with Grubhub that integrates Square directly into Grubhub's ordering flow and adds Cash App Pay as a checkout option, aiming to simplify restaurant operations and drive additional volume through Block's ecosystem (Key Developments).
• Square's food and beverage platform received a major upgrade with new AI enabled cost management tools, multichannel menu management, and redesigned kiosks to help restaurants boost throughput, control expenses, and scale more efficiently on a single platform (Key Developments).

Valuation Changes

• The discount rate has risen slightly from 7.73% to about 7.74%, reflecting a modestly higher required return on Block’s equity.
• Revenue growth has edged down slightly from roughly 11.53% to about 11.41%, indicating a marginally more conservative top line outlook.
• Net profit margin has increased meaningfully from about 7.81% to roughly 9.01%, signaling improved expectations for underlying profitability.
• The future P/E has been reduced from about 23.2x to roughly 20.1x, implying a lower valuation multiple on forward earnings despite stronger margin assumptions.
• Fair value remains unchanged at approximately $84.01 per share, as higher margin expectations and a lower forward multiple offset modest changes in growth and discount rate assumptions.