William Blair analysts upgraded Block (NYSE:SQ) to Outperform from Market Perform, citing several positive developments. The analysts highlighted improved execution at Square, particularly in merchant onboarding and new vertical solutions like hospitality.
CEO Jack Dorsey has brought renewed energy to the company, consolidating apps and simplifying payment acceptance with innovations like Tap-to-Pay on iPhone. Cash App is emerging as a significant player in the neobank space, with new monetization avenues like short-term loans.
Expense discipline has also improved, with first-quarter 2024 EBITDA margins rising to 33.7% of gross profit from 21.5% last year. The analysts see further potential in Square’s distribution deals and expect the stock to re-rate higher as the company demonstrates its ability to achieve its Rule-of-40 goal.