Block Inc. (XYZ) demonstrated impressive third-quarter performance, with both revenue and earnings surpassing forecasts, leading management to increase its full-year 2025 financial projections. This strong showing occurred despite investors reacting unfavorably to short-term operational hurdles related to a new processing partner agreement. BTIG analyst Andrew Harte reaffirmed a 'Buy' rating for Block, setting a price target of $90, highlighting the company's enduring growth narrative.
Harte noted that the market's 11% post-earnings dip in Block's stock was an overreaction. He attributed the selling pressure to a perceived discrepancy in Square's gross payment volume (GPV) and gross profit (GP) growth. This gap, primarily due to an updated agreement with Square's processing partner, momentarily increased costs but simultaneously enhanced operational agility and cash flow, which Block can now leverage for interest income. Additionally, hardware-related challenges, including tariffs and discounts, contributed a minor percentage to this disparity. Square's strategic focus on attracting larger merchants, while leading to slightly lower transaction fees, is expected to cultivate greater long-term customer value.
Block’s third-quarter gross profit surged by 18.3% year-over-year, reaching $2.66 billion, outperforming anticipations. The Cash App segment was a key driver, achieving a 24.4% year-over-year growth, significantly exceeding analyst predictions. The Square division also posted a solid 9.2% increase in gross profit, slightly below initial forecasts, while adjusted operating income hit $480 million, surpassing both internal targets and market estimates. The company's consistent acceleration in both domestic and international growth underscores the robust demand across its diverse ecosystem. Harte anticipates that Block’s forthcoming Investor Day will further illustrate how Square and Cash App are evolving as distinct yet mutually reinforcing growth engines.
Block Inc.'s ability to deliver robust financial results amidst market fluctuations demonstrates its inherent strength and strategic vision. The company's proactive measures to enhance operational flexibility and focus on long-term value creation position it well for sustained expansion, inspiring confidence in its future trajectory despite temporary setbacks.