Morgan Stanley upgrades Block Inc. rating, optimistic about its market expansion and AI-driven profit growth

2026-02-27 15:21:29

Abstract generation in progress

Investing.com — Morgan Stanley has upgraded Block Inc to Overweight, citing faster growth and an expanding total addressable market supporting a higher valuation. The broker’s target price is set at $93.

Morgan Stanley stated that Block has expanded its addressable market through product improvements, new product launches, and more flexible pricing strategies.

Track every rating and target price change on InvestingPro

Since early 2025, the company has expanded its credit products within Cash App, with consumer loan disbursements increasing 69% year-over-year in Q4, and Cash App Borrow disbursements rising 223%. On the merchant side, pricing adjustments have attracted larger merchants and increased the usage of ancillary services.

The broker said these initiatives have driven improved growth rates. Gross profit grew 24% in Q4 2025. This marks a recovery from 2022 to 2024, when gross profit growth slowed from 36% in 2022 to 18% in 2024, due to higher pricing limiting the company’s market coverage.

Morgan Stanley also noted key performance indicators are improving. Since Q2 2025, total merchant payment volume has accelerated. In Q4, Cash App gross profit increased 33%, and monthly active users rose from 57 million in 2024 to 59 million in 2025. Main bank active users of Cash App increased by 1 million quarter-over-quarter to 9.3 million.

Block also plans to cut staff by about 40% to approximately 6,000 employees to drive automation and replace human labor with computing power.

Morgan Stanley said its $93 target price, based on an 18x forward P/E ratio in 2027, appears conservative given expected revenue acceleration and approximately 26% EPS growth in 2027. The firm shifted its valuation approach from previous segment-based EBITDA valuation to forward adjusted EPS (including stock-based compensation).

Analysts raised their 2026 EPS forecast from $3.19 to $3.81 and their 2027 forecast from $4.10 to $5.19, citing stronger revenue growth and higher profitability potential from AI initiatives.

This article was translated with the assistance of AI. For more information, please see our Terms of Use.

View Original

This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.