Mackenzie Tatananni

Block stock was reeling Friday after the payments company reported a disappointing fourth quarter, but J.P. Morgan analysts remain bullish on the shares.

In a research note Friday, analysts led by Tien-tsin Huang reiterated an Overweight rating on Block stock with a $90 price target.

Shares of Block, formerly known as Square, tumbled 14% to $71.73 on Friday after the company's fourth-quarter results missed analysts' expectations. J.P. Morgan's price target suggests a potential upside of nearly 22%.

Earnings for the December quarter came in at 71 cents a share, missing the FactSet consensus estimate for 88 cents. Block reported net revenue of $6.03 billion, below the $6.29 billion Wall Street expected.

The first-quarter outlook also disappointed. Block anticipates gross profit of $2.32 billion in the quarter; analysts polled by FactSet had expected $2.39 billion. The company sees adjusted operating income of $430 million, missing the $457 million analysts estimated.

For the full year, Block expects "strong profit growth" of at least 15%, with growth for Cash App, and Square expected to "improve meaningfully" in the back half of 2025.

The J.P. Morgan team noted that "the shape of growth came as a surprise, " with the below-consensus guide "driving a steeper acceleration curve in 2025 than we expected, raising the execution bar even higher."

The analysts acknowledged that management sounded confident that their go-to-market strategy would pay off during Block's latest earnings call, "candidly articulating that development velocity is the measure by which we should gauge success."

They noted that the company has taken steps in the right direction with the integration of Afterpay onto the Cash App Card, which began last year. In their view, Block has exhibited impressive cost discipline while making targeted product and go-to-market investments, even though "growth outcomes are likely quarters away."

The team's Overweight rating is tied to the scarcity of Block's two-sided network, a business model linking two distinct user groups on a shared platform, with "above market growth at reasonable value." However, the analysts remain cautious about the level of upside achievable in the 2025 guide.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 21, 2025 10:58 ET (15:58 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.