Block’s Price Target Raised, Sell Rating Maintained on Stock (NYSE:XYZ)

Block, Inc. (NYSE: XYZ), the financial technology firm behind Square and Cash App is dealing with analyst skepticism, sector underperformance, and the burgeoning influence of stablecoins. While the broader FinTech sector anticipates a potentially solid setup for the second quarter, Block's stock performance has lagged, and analysts are divided on its future prospects.

Truist Securities recently underscored this uncertainty, raising its price target on Block to $65 from $61, yet maintaining a “Sell” rating, a move that speaks volumes about the inherent risks the firm perceives.

Block's current stock price of $69.03 reflects a recent rebound, but year-to-date losses of 20% weigh on holders, significantly trailing the S&P 500‘s 6.7% gain. This underperformance comes despite a “Buy” consensus from 31 analysts and an average 12-month price target of $69.85, suggesting a disconnect between overall market sentiment and the nuanced concerns highlighted by firms like Truist.

The upcoming Q2 2025 earnings report, scheduled for release on August 7, will be a crucial test for Block. The consensus estimate for EPS is $0.50, a figure that will be closely scrutinized in light of the company's Q1 miss, where it reported $0.56 EPS compared to an expected $0.87.

This earnings miss, coupled with a revised gross profit growth forecast for 2025 (down to 12% from 15%), triggered a significant drop in Block's share price, highlighting the market's sensitivity to any signs of slowing growth.

One of the key themes dominating discussions among FinTech investors is the rise of stablecoins. Truist anticipates that earnings calls will be heavily focused on this topic, as management teams grapple with the potential impact of stablecoins on the industry.

The increasing adoption of cryptocurrencies and stablecoins presents both opportunities and challenges for companies like Block, which have already made significant investments in the crypto space. Block's strategic initiatives, such as the launch of Bitkey, a self-custody Bitcoin hardware wallet, and the development of Proto, a Bitcoin mining system, demonstrate its commitment to embracing these new technologies. However, the regulatory landscape surrounding cryptocurrencies remains uncertain, and the potential for disruption to traditional payment systems is a significant concern for some analysts.

With a significant portion of its business focused on small businesses and less-affluent consumers through Square and Cash App, Block is particularly vulnerable to economic downturns and fluctuations in consumer spending. Coad also pointed to the potential risks associated with Block's expansion into lending products, which could lead to increased credit losses in the future. This cautious outlook is echoed by other analysts who have expressed concerns about increased competition in the payments space and the potential for regulatory headwinds.