Block cut to Market Perform at BMO on limited gross profit upside

seekingalpha11-26 00:05

Anna WebberBMO Capital Markets downgraded Block (NYSE:SQ), parent of the Square payment system and Cash App, to Market Perform from Outperform as analyst Rufus Hone said it will be difficult to exceed...

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00:05 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/news/4330387-block-cut-to-market-perform-at-bmo><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Anna WebberBMO Capital Markets downgraded Block (NYSE:SQ), parent of the Square payment system and Cash App, to Market Perform from Outperform as analyst Rufus Hone said it will be difficult to exceed...</p>\n\n<a href=\"https://seekingalpha.com/news/4330387-block-cut-to-market-perform-at-bmo\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU2756315318.SGD","symbol_name":"ALLIANZ INCOME AND GROWTH \"AMG\" (SGDHDG) INC 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Market Perform from Outperform as analyst Rufus Hone said it will be difficult to exceed expectations on gross profit without lifting the company's headcount cap. Block (NYSE:SQ) stock slipped 1.5% in Monday morning trading. \"We believe this year's beat/raise cycle will prove difficult to sustain in 2025/206,\" the analyst wrote in a note to clients. \"We see potential risk to Cash App GP growth expectations, while the 'Rule-of-40' target for 2026E implies a high bar for GP/employee (~$1.0M), approaching Mastercard levels.\" Block's (SQ) recent really, fueled by expected benefits from a deregulatory/pro-bitcoin Trump administration, sets a higher bar for further share outperformance, Hone said.  In the Cash App business, there has been no growth in actives for three straight quarters; however, expectations reflect an acceleration in actives growth through 2025, the analyst said. That implies a steep increase in monetization/inflows per active if user growth disappoints. Hone also sees a risk to Block's (SQ) Rule of 40 targets. (Rule of 40 adds revenue growth rate to its profit margin.) The company's margin improvement year-to-date has surprised to the upside, a benefit of its under-12K headcount cap. If the cap is extended through 2026, BMO estimates it would imply gross profit/employee of ~$1M (behind only Visa/Mastercard among Hone's coverage). \"We view this as a high bar for SQ to achieve while maintaining mid-teens gross profit growth,\" the analyst said. BMO's Market Perform rating on the stock contrasts with the SA Quant rating of Strong Buy and the average SA Analyst rating and average Wall Street rating, both at Buy.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2486165031"}