Block Inc (XYZ) Stock Forecast & Price Target

Block's positive outlook is supported by its expectation of incremental margins increasing annually, alongside a substantial 17% year-over-year gross profit growth forecast to reach $11.98 billion by FY26. The company has demonstrated impressive expansion in its Cash App Borrow product, achieving a five-fold increase in loan originations over the past two years, which management plans to continue while maintaining stable loss rates. Additionally, Block's strategic emphasis on enhancing synergies between its two core businesses, Square and Cash App, alongside increased investment in marketing and sales, positions the company for sustainable growth and profitability.

Block faces significant challenges linked to its dependency on small and medium-sized businesses (SMBs) and underbanked consumers, which raises concerns about its ability to achieve revenue growth amidst a potential economic downturn. The company's transformation efforts, aimed at addressing prior execution failures, have not yet yielded positive results, evidenced by stagnating new volume added (NVA) metrics and organizational inefficiencies. Furthermore, Block's current valuation reflects a substantial discount compared to industry peers, with an FY26 EV/EBITDA multiple of approximately 8.5x significantly trailing the industry average of around 20x, suggesting a lack of investor confidence in its growth trajectory.