© Reuters. Oppenheimer Resumes Block (SQ) at Outperform on Higher Gross Profit/Valuation
Oppenheimer analyst Dominick Gabriele initiated research coverage on Block (NYSE:) with an Outperform rating and a $150.00 per share price target.
The analyst believes the Street consensus is too low for 2023 after shares fell sharply in recent months.
“E-com player focused in integrated payments moving upstream with large runway. Cash App, although scaled in US, has room for cross-sell and international expansion helping to offset some weakness likely NT in average volume per user given debit/ stimulus lapping. Adjusted EBITDA ex. depreciation closer to consensus given $2.3B 2022FY OPEX guidance and losses at Afterpay higher than Street likely modeling. EBITDA 2023FYE could have upside given management flexibility in higher revenue outlook. Crypto a gateway to Cash App likened to P2P vs. actual revenue driver,” Gabriele wrote in a note.
The analyst notes that Block’s “gross profit multiple is absolutely tied to PYPL’s valuation.” This thesis helps him come up with a $150.00 per share price target.
“SQ’s traded between ~1.0–1.5x PYPL’s multiple since 2016, why stop now? Given our expectation for , we believe SQ could revert to 11.82x.”
The analyst also added that he expects consensus EPS to fall post 1Q22 earnings.
Block stock price is down 0.3% in pre-open Wednesday.
By Senad Karaahmetovic
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