Earlier this week Canaccord Genuity Capital Markets’ slashed their 12-month price target on Block Inc (NYSE: SQ) while reiterating their buy rating. They cut their 12-month price target from $210 to $150. This comes after several other analysts cut their 12-month price targets, bringing the average down from $146.50 to $129.34.
Block currently has 50 analysts covering the stock with an average 12-month price target of C$129.34, or an upside of 87%. Out of the 50 analysts, 12 have strong buy ratings, 25 have buy ratings, 11 have hold ratings, and the last two analysts have sell ratings on the stock. The street high price target sits at $310 and represents an upside of about 350%.
In Canaccord’s note, they say that Block has, “evolved into an ecosystem of ecosystems, with the two primary ecosystems in Square and Cash App,” which has a combined total addressable market of $190 billion.
They are very confident that Block can build an ecosystem that encompasses eCommerce, P2P, and financial services. They add that they expect “to see this interconnection expand well beyond Afterpay.” They expect the company to incorporate several different payments and personal finance segments, such as decentralized finance.
On Block’s Square segment, which is targeting $120 billion in gross profit TAM, Canaccord says that even though it’s Block’s most mature business, it is still in the early innings as the company has a 13% market share in micro sellers, 4% share of SMBs, and a sub 1% share of mid-market sellers.
Canaccord expects that Block will be able to continue its growth in this segment with the potential that Block will start to target the international market. They add, “We think the company will leverage the Afterpay network to accelerate the pace of global expansion in the coming years.”
Canaccord says that Cash App is targeting $70 billion in TAM. They say that the company has an active user base of 80 million users with a customer acquisition cost of $10, which is well below neo-banks of $30-$50, and retail banks of $300-$600. Canaccord writes that this enables the company to potentially deliver a 6x ROI over three years.
They add that the company has seen its gross profit per active user grow from $5 in 2016 to $47 in 2021, and add, “We are optimistic about the economic model here, which is based on three variables – actives, inflows per active and monetization rate.”
Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
