Block Inc. (NYSE: SQ) has been identified by Bernstein as a “new best idea” for 2025, with the stock’s price target being increased from $90 to $120 while maintaining an “Outperform” rating. This optimistic forecast is based on several catalysts, including accelerated growth in Square’s Gross Payment Volume (GPV), strong 30% EBITDA gains from operational efficiencies, easing regulatory pressures, and the possibility of being included in the S&P 500 Index. The stock is currently trading at $95.87, with a notable 24% gain over the past month and a 32% increase in year-to-date performance.
Block’s appealing valuation includes 16% of its market capitalization held in cash, allowing flexibility for growth initiatives. Following Bernstein’s announcement, the stock rose 1.7% in premarket trading on Monday. Bernstein also forecasts that Block could generate $3.0 billion to $3.5 billion in cash flow by the end of 2025. The recent success of Block during the Black Friday and Cyber Monday weekend further supports its growth potential, with a record-breaking 144 million transactions facilitated globally, marking a 17% increase year-over-year.
The integration of Afterpay with Google Pay ahead of the holiday season is identified as a significant growth driver, allowing customers to split purchases into installments directly through Google Pay. This move expands Afterpay’s reach and boosts Block’s revenues. The rollout of Afterpay on Cash App Cards is expected to transform the cards into a viable alternative to traditional credit cards, enhancing user adoption and financial performance.
Block’s Q3 2024 earnings demonstrated its operational strength, with total net revenue increasing by 6.4% year-over-year to $5.98 billion. Excluding Bitcoin revenue, the topline grew by 11%, driven by a 20% increase in subscription and services revenue. Adjusted EPS surged by 76% to $0.88, fueled by improved cost management and a 370-basis-point expansion in net profit margins. The company’s strong balance sheet includes $2.7 billion in net cash and a $775 million revolving credit facility, enabling strategic acquisitions.
Analyst upgrades reflect confidence in Block’s growth potential, with BTIG raising its price target to $110 from $90 and maintaining a Buy rating. Goldman Sachs also increased its price target to $102 from $87, highlighting fintech’s growth potential amid a stronger economy. Despite these positive developments, analysts caution about valuation and limited visibility to an acceleration in fundamentals, favoring a selective approach to investments. Overall, Block’s ability to sustain growth through strategic initiatives and operational efficiency makes it a compelling pick for 2025, supported by strong fundamentals and innovative product rollouts.
