Overview
HSBC has turned more positive on Block after the company's Q4 2025 report, upgrading the stock to Buy and increasing its target price to $77 from $70. In a note, analyst Saul Martinez sharply raised earnings projections and cited both stronger profit dynamics and a marked de-rating in valuation as the basis for the more constructive stance.
Analyst rationale
Martinez said the shares now show approximately 20% upside and described a "material increase in earnings power and sizable valuation de-rating" as underpinning HSBC's upgraded view. The bank emphasized that the firm's plan to reduce its workforce by nearly half should not be read as a reaction to operational strain. As Martinez put it, the reduction is "not coming from a position of weakness; business and financial performance are healthy."
HSBC argued the headcount reductions are expected to "meaningfully increase its earnings power," pointing to robust gross profit growth and expanding operating margins as supporting factors. As a result of that view, the bank lifted its 2026 adjusted operating earnings estimate by about 20% and increased its 2026 adjusted EPS assumption by 16%, moves that the note said are broadly aligned with the company’s guidance.
Timing and consensus implications
Crucially, HSBC highlighted that the bulk of the earnings improvements are concentrated toward the back half of 2026. Management has indicated that roughly 60% of adjusted operating earnings for 2026 will be generated in the second half of the year, a front-loaded timing profile that Martinez said implies "2027e consensus estimates are too low."
The bank's updated Q4 2026 EPS estimate of $1.16 annualizes to $4.61, which HSBC noted is only about 4% below the current 2027 consensus. On that basis, HSBC expects consensus forecasts to move higher and said its own 2027 projections are 6% to 9% above current consensus. The bank also added 2028 estimates as part of its revised outlook.
Valuation and conclusion
Martinez concluded that Block’s valuations "have de-rated materially in the past year," and that this combination of improved earnings power and a lower valuation creates what HSBC views as an attractive risk-reward profile for investors.
Key points
- HSBC upgraded Block to Buy and raised its price target to $77 from $70, noting roughly 20% upside implied by the new target.
- The bank increased 2026 adjusted operating earnings and adjusted EPS estimates by around 20% and 16%, respectively, and introduced 2028 estimates.
- Management guidance indicates about 60% of 2026 adjusted operating earnings will be generated in the second half of the year, shifting expected earnings delivery later in 2026.
Risks and uncertainties
- Earnings concentration in the second half of 2026 creates timing risk for expected profit improvements and for investor expectations tied to full-year performance.
- Realization of the forecasted uplift in earnings power depends on the outcome of the planned workforce reduction and associated margin gains, an execution-related uncertainty noted in the bank’s analysis.
- Consensus estimates for 2027 may be understated, which could lead to material revisions in analyst expectations and market pricing as HSBC expects its own forecasts to sit 6% to 9% above current consensus.
Sectors and market impacts
- Equity investors monitoring company-specific earnings and valuation dynamics are directly affected by HSBC's revised stance.
- Broader market participants tracking corporate profitability and margin trajectory may reassess expectations where similar cost actions and back-end loaded earnings patterns are present.