Morgan Stanley cuts Block Inc. stock rating to underweight By Investing.com

On Thursday, Morgan Stanley revised its rating on Block Inc. (NYSE: SQ), formerly known as Square, downgraded the stock from Equalweight to Underweight and cut the price target to $60 from $62. future income.

An analyst from Morgan Stanley pointed out that the decline comes from a price that is slightly below Block’s peers as it is adjusted for growth, especially in the Seller part of the business. The company used a multiple of 12x Seller EV/Ebitda, which is slightly lower than its competitors because it believes that Block’s high rates of Ebitda growth cannot be sustained in the short term, which could lead to lower top line growth.

For Block’s Cash App segment, Morgan Stanley has set a 2.5x EV/Gross Profit multiple, aligning with financial partners such as buyers. Confirm Holdings (NASDAQ:) Inc. and Synchrony Financial (NYSE: ), and slightly below the Capital One Financial Corp (NYSE: ). A comparison of the Cash App’s profit growth was made against the financial growth of traditional financial companies to justify this calculation.

The company also considered the long-term potential of Cash App to evolve into a bank similar to Capital One, targeting the younger Gen Z and millennial demographic. Morgan Stanley’s calculations assume that Cash App can achieve the same revenue per user (ARPU) and the banking sector of Capital One for those who want it.

However, the analyst noted that the current situation, while the Cash App reflects Capital One’s success with young people, seems to have already settled into the current mindset of the app.

Changes in the stock of Block Inc. by Morgan Stanley shows caution in the company’s ability to continue its growth and compete effectively in the consumer finance market. The new price of $60 reflects these revised expectations.

InvestingPro Insights

Analyzing the performance of Block Inc. (NYSE:SQ) recently worked using InvestingPro’s data lens and insights to provide deeper insight into a company’s health and market conditions. Block Inc. it trades with a market capitalization of about $49.27 billion and a price-to-earnings ratio (P/E) of 5000, indicating that investors can expect significant future growth. The adjusted P/E ratio for the last twelve months as of Q4 2023 stands at -1149.1, indicating a profitable company’s earnings.

Block Inc. has reported a revenue growth of 25.01% over the last twelve months from Q4 2023, which is a strong indicator of the company’s ability to grow its business. In addition, the company’s gross margin during the same period was 34.58%, showing its ability to manage the cost of its investment.

InvestingPro’s recommendations indicate that Block Inc. it is expected to see economic growth this year, and it is still popular in the financial industry. Its price movement has been steady, with the largest price increase in the last six months, which resulted in a 90.1% return. This volatility and performance may be attractive to investors looking for growth opportunities in the sector.

For those considering investing in Block Inc., there are additional InvestingPro Tips that may inform your decision. By using a coupon code PRONEWS24you can get an additional 10% discount annually or every year for Pro and Pro+ subscriptions, unlocking access to 11. InvestingPro Instructions for Block Inc. This can help assess the company’s future potential and make an informed decision.

This article was created with the help of AI and reviewed by an editor. For more information see our T&C.

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