Block Inc. (XYZ) PT Lowered to $60 at JPMorgan

JPMorgan analyst Tien-tsin Huang lowered the price target on Block Inc. (NYSE: XYZ) to $60.00 (from $90.00) while maintaining a Overweight rating.

The analyst comments "Block posted a rare top-line miss (GP +9% vs 11% guide) led by surprise weakness at Cash App, a bit of a role reversal as Square modestly outperformed. The fact that XYZ missed 1Q guidance with just five weeks left in the quarter naturally raises questions (e.g. quality of consumer base, TAM penetration, competition), but was explained by management as weaker inflows and spend from tax refunds that payout after guidance was issued, causing Cash App GP growth to decelerate 6ppt sequentially to 10% (JPMe 12%). Guidance was cut to reflect a weaker macro beyond what was observed in April month, but still implies acceleration, though not quite as steep as before (now 9% in 1Q to 12% for FY25 vs. prior 11% in 1Q to mid-teens for FY25). The good news is that Square did narrow growth gap to peers (GPV 1ppt from being in-line w/ Clover, narrowest in two years), showing preliminary returns from recent investments, offering hope Cash App's new expanded network strategy can do the same in a less competitive market than Square. The challenge investors must grapple with is that much of the implied acceleration in Cash App relies upon lending to the base that just negatively surprised on spend. We're lowering our estimates to be slightly below guidance on GP, but in-line on profit for FY25 and Rule of 40 for FY26, and remain Overweight with after market stock trading at ~20x TTM FCF, reasonable in our view considering growth. We said last qtr. that the execution bar is high, but now the bar could be as high as ever with management calling 1Q a bottom with drivers in place to achieve acceleration and we're cautiously optimistic recognizing margin for error is low in a tough macro backdrop. We look forward to digging deeper on strategy with Block Head Dorsey at our TMC Conference on May 13."

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