Analyst Says Block’s Low-Trading Multiples Represents a Compelling Buying Opportunity

Read Time:1 Minute, 21 Second
  • Citigroup analyst Peter Christiansen maintained Block Inc (NYSE: SQ) with a Buy and lowered the price target from $135 to $90.

  • Christiansen believes that SQ is a compelling buy opportunity, with EV/GP and EBITDA at their lowest levels ever.

  • Efficiency gains, tighter discretionary spend, and slower hiring will all be key to 2023. These have already contributed to a 20% – 25% decrease in expenses in the last two quarters.

  • Additionally, with 23%-24% gross profit growth expectations, the analyst estimate Block’s EBITDA margin could be near ~20% in 2023, up 500 bps YoY.

  • The bulk of these gains will likely materialize in 2H’23 and 1H’24, leading the analyst to model a 40% 3-year EBITDA CAGR in a “soft landing” scenario.

  • Against the stock’s EV/FYE’23 EBITDA of ~30x (consensus estimates), the analyst believes the stock is pricing deeper cyclicality.

  • With normalizing earnings power now in place, the analyst shifted his valuation framework to a forward EV/EBITDA multiple of 35x-40x. This is consistent with both pre-pandemic norms as well as expectations for a 40% EBITDA3YR CAGR.

  • Price Action The SQ shares traded at $62.78, up 2.23% since Wednesday’s last check.

The latest ratings for SQ

Date

Firm

Take Action

From

To

Mar 2022

Mizuho

Keep it up

Buy

February 2022

DA Davidson

Keep it up

Buy

February 2022

BMO Capital

Upgrades

Market Performance

Outperform

View More Analyst Ratings for SQ

View the Latest Analyst Ratings

More information from Benzinga

Register now to receive real-time alerts about your stocks Benzinga Pro Get it for free Try the tool that will help you invest smarter, faster, and better.

© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Happy
Happy
0 %
Sad
Sad
0 %
Excited
Excited
0 %
Sleepy
Sleepy
0 %
Angry
Angry
0 %
Surprise
Surprise
0 %
Previous post Boston big man legend Kevin Garnett answers questions about this season’s Celtics
Next post Hugh Jackman confirms key plot detail for Deadpool 3.