Morgan Stanley on Thursday reiterated an Equalweight rating on Block Inc. (NYSE: XYZ) and left its price target at $72.00, a level that the firm says is about 43% higher than the prevailing share price of $50.37. Morgan Stanley's target remains below the fair-value indications produced by InvestingPro models, which continue to classify XYZ among potentially undervalued fintech names.
The bank adjusted its outlook for Square Seller activity to account for a modest slowdown in gross payment volume (GPV). For the fourth quarter, Morgan Stanley lowered its Seller GPV growth forecast to +10.3% year-over-year from a prior estimate of +12.7%. That revised Q4 Seller projection reflects an expected +7% GPV expansion in the U.S. and +26% GPV growth internationally.
Analysts at Morgan Stanley also quantified the margin impact of Block's processor transition, forecasting roughly a 2 percentage point negative gross profit spread tied to that change. As a result, Square's gross profit growth is now projected at 8%, down from an earlier forecast of 10.6%. The firm expects this gross-margin gap related to the processor shift to persist until around the second quarter of 2025.
Looking at the fourth quarter of 2025, Morgan Stanley trimmed its projection for total gross profit growth to +18.2%, from a previous +19.3% view. Within that total, the firm models Square gross profit growth of +8% and Cash App gross profit growth holding at +25%. The bank's forecast for adjusted operating income in that quarter is $557 million, which it says would equate to a 20.4% margin.
For fiscal year 2026, Morgan Stanley maintained its aggregate gross profit growth assumption of +16.9%. Its line-item expectations allocate +12% gross profit growth to Square and +20% to Cash App, with adjusted operating income of $2,704 million and adjusted earnings per share of $3.19, a slight decrease from a prior $3.20 forecast.
The firm noted that Block's current price-to-earnings ratio stands at 10.37, and that the company is scheduled to report its next quarterly earnings in 14 days. Despite a roughly 35% decline in the stock over the past year, InvestingPro highlights several constructive elements for the company, including strong liquidity and profitability. InvestingPro also provides additional analysis and tips on Block alongside coverage of more than 1,400 other U.S. equities.
Beyond Morgan Stanley's note, the company disclosed several operational milestones and corporate moves. Block reported that it has originated more than $200 billion in lending across its ecosystem, citing the use of proprietary underwriting technology for products including Cash App Borrow, Afterpay, and Square Loans. The company attributes this cumulative lending achievement to an approach that leverages near real-time behavioral data for loan approvals.
On the product front, Square rolled out an upgraded Square Register point-of-sale system that the company says processes transactions 40% faster and includes enhanced features intended to improve retail operations. Block also expanded its partnership with Thrive to enable smoother inventory management for merchants by synchronizing product catalogs and sales across platforms such as Shopify.
In the analyst community, Cantor Fitzgerald has initiated coverage of Block with an Overweight rating, pointing to the firm's turnaround efforts and new product initiatives as primary reasons for its stance.
On the personnel side, Block announced that Ajmere Dale, its Chief Accounting Officer, will step down in February. Amrita Ahuja will serve as Interim Principal Accounting Officer while the company searches for a permanent successor.
These developments underscore a mix of near-term operational headwinds, primarily linked to a processor transition that the Morgan Stanley team expects to pressure gross margins, alongside strategic product upgrades, ecosystem lending growth, partnership expansion, and executive turnover.
Summary
Morgan Stanley maintained an Equalweight rating and a $72 target on Block, while trimming GPV and gross profit forecasts to reflect modest deceleration and a processor-transition-related margin drag expected until about Q2 2025. Block reported lending above $200 billion, released an upgraded POS product, expanded a retail partnership, and announced a senior accounting leadership change. Cantor Fitzgerald initiated coverage with an Overweight rating.
Key points
- Morgan Stanley kept an Equalweight rating on Block and a $72 price target, implying about 43% upside from the then-current price of $50.37.
- The bank reduced Seller GPV growth assumptions for Q4 to +10.3% year-over-year and lowered near-term gross profit forecasts for Square as a result of a processor transition.
- Operational highlights include more than $200 billion in cumulative ecosystem lending, a faster Square Register POS release, an expanded Thrive partnership, and an accounting leadership change.
Risks and uncertainties
- Processor transition: Morgan Stanley expects about a 2 percentage point negative gross profit spread tied to the processor change that could pressure Square gross margins until roughly Q2 2025 - this affects the payments and merchant services sector.
- GPV deceleration: A modest slowdown in gross payment volume lowers revenue-growth assumptions for Seller products and could influence short-term results for payment-processing segments.
- Executive turnover: The departure of the Chief Accounting Officer and interim appointment introduces near-term leadership uncertainty in financial reporting and accounting operations.