Raymond James has greater confidence in Block, upgrades to outperform

Investing.com -- Raymond James raised Block to Outperform from Market Perform in a note Friday, citing increased confidence in the company’s growth trajectory for 2025. 

The analysts highlighted a deeper analysis of Block’s Seller Gross Payment Volume (GPV), which they view as the stock's most critical metric.

Following a "deep dive into the building blocks of Seller GPV," Raymond (NS:RYMD ) James expressed optimism about a potential acceleration in GPV growth to low double digits in 2025, up from approximately 8% in 2024. 

This anticipated growth stems from "easing comps," international expansion with GPV growth exceeding 20% year-to-date, improved distribution partnerships such as those with US Foods and Sysco (NYSE:SYY ), and ongoing product innovation.

Raymond James noted that the challenging 2024 environment, including low-single-digit declines in same-store sales (SSS), sets the stage for easier comparisons in 2025. 

They estimate SSS will return to modest growth, adding to gains driven by new client acquisitions. "We believe growth can accelerate back into the double-digits in ‘25," the firm states.

Despite the recent 33% increase in Block’s stock price over the last three months, Raymond James considers the valuation compelling. 

They explain the shares trade at 16 times the estimated 2026 adjusted EBITDA, including stock-based compensation, versus a peer average of 20 times. 

The analysts believe this valuation is justified given Block's faster EBITDA and free cash flow (FCF) growth compared to competitors.

The firm has set a $115 target price for Block, reflecting a 22x multiple of the estimated 2026 adjusted EBITDA. 

"We believe valuation is more than attractive at current levels," the analysts stated, adding that management's focus on improving EBITDA and FCF quality should further enhance the stock's multiple.

Raymond James concluded that "it’s time," signaling their renewed confidence in Block’s potential to outperform its peers.

Source: Investing.com