Raymond James, a financial services firm, has upgraded its rating for Block from “Market Perform” to “Outperform”. The revision, announced last Friday, is based on the firm’s growing confidence in Block’s potential for growth by 2025.
The financial analysts emphasized their thorough examination of Block’s Seller Gross Payment Volume (GPV), considering it as a pivotal performance indicator for the stock.
After an in-depth study of the components making up the Seller GPV, Raymond James voiced positive projections about a possible surge in GPV growth to low double digits by 2025, a hike from the estimated 8% in 2024.
The predicted growth is attributed to factors such as favorable comparisons due to “easing comps”, international expansion where GPV growth has surpassed 20% since the beginning of the year, enhanced distribution partnerships like those with US Foods and Sysco, as well as continuous product innovation.
Raymond James pointed out that the difficult environment anticipated for 2024, including slight decreases in same-store sales (SSS), will pave the way for easier comparisons in 2025.
The firm forecasts a return to mild growth for SSS, complemented by gains from acquiring new clients. They predict, “We anticipate growth bouncing back to double digits by 2025.”
Despite a 33% surge in Block’s stock price over the past quarter, Raymond James finds the valuation appealing.
The firm clarified that Block’s shares are trading at 16 times the predicted 2026 adjusted EBITDA, inclusive of stock-based compensation, in comparison to the average of 20 times among peers.
They argued that this valuation is justified, given Block’s faster EBITDA and free cash flow (FCF) growth relative to its competitors.
Raymond James has set a target price of $115 for Block, which reflects a 22x multiple of the estimated 2026 adjusted EBITDA.
“We believe the current valuation is extremely attractive,” the analysts commented, adding that the company’s efforts to enhance EBITDA and FCF quality should further boost the stock’s multiple.
In conclusion, Raymond James indicated “it’s time,” signaling their renewed faith in Block’s ability to outshine its competitors.
