Analyst raises Block stock target as 2025 favorite

On December 2, 2024, payments processing company Block was highlighted by Bernstein as a top stock pick for the year 2025. Analyst Harshita Rawat updated her rating on Block to outperform and significantly increased the price target for its shares from $90 to $120. This revised target suggests that Block's stock could see a 35% increase based on its value at the close of trading on the Friday before the announcement. This optimistic outlook follows recent regulatory scrutiny faced by Block and its affiliated services, including Square, a point-of-sale system known for its innovation in payment solutions. Rawat emphasized that both segments could gain from a more favorable regulatory environment anticipated in the coming year. The industry expectation indicates that Square's gross payment value could rise from 2% to 3% in 2025. Furthermore, Rawat predicts Block's EBITDA growth to reach 30% due to increased operational efficiency. The analyst believes that a combination of growing direct deposit penetration along with innovations in borrow and commerce initiatives, such as Cash App and Afterpay, will drive substantial profit growth for the company. Notably, Block also has the potential to be included in the S&P 500 index, a sentiment echoed by Rawat, who stated that the company now meets all necessary criteria for inclusion. This leads to a conclusion that despite recent lagging performance relative to the broader market, Block's prospects for the upcoming year appear strong, as evidenced by a 5% increase in stock value following the announcement.