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Piper Sandler analysts started Block Inc (NYSE:SQ) with an Overweight rating and a $93 price target and PayPal (NASDAQ:PYPL) with a Neutral rating and an $85 price target in separate notes on Tuesday.
Writing about Block, they told investors the company is “very well positioned” to generate consistent revenue and earnings growth over the next several years based on its increasing subscription-based revenue growth from Square customers.
“The company is enjoying outsized gross profit growth from Cash App as users increasingly utilize the app’s instant transfer capabilities. We expect SQ to increase customer engagement through Square and Cash App, which we believe will generate outsized revenue and operating income growth relative to peers. This outsized growth combined with ever-improving fee-based services for small-medium businesses should garner a premium multiple to peers,” said the analysts.
On PayPal, the analysts commented that the company is “going through a transitional period,” shifting from pushing for growth to harvesting what it has built.
“The company will be looking to increase consumer engagement in its products and focus on efficiency rather than drive customer growth as it has for the past several years. This transition will create uncertainty for the market and until we get confidence PYPL can sustain earnings growth with limited customer growth we expect the stock to remain range bound,” they explained.
PayPal shares are down around 0.9% Tuesday, while Block is up more than 4%.
