Morgan Stanley analyst James Faucette has maintained their neutral stance on XYZ stock, giving a Hold rating on October 1.
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James Faucette has given his Hold rating due to a combination of factors affecting Block’s Cash App business. While there is optimism about the potential for gross profit acceleration in the second half of the year, particularly with the expansion of Borrow and Cash Card spending, the overall investor sentiment remains cautious. This caution is driven by uncertainties in the macroeconomic environment, including unfavorable labor data and concerns about credit deterioration, which could impact Block’s growth prospects.
Additionally, there is a renewed focus on profitability over growth, with investors closely monitoring loss rates and operational expenses. The incremental gross profit from Borrow is considered lower quality, deserving a lower valuation multiple compared to other business segments. Despite these challenges, there is some confidence in Block’s ability to manage loss rates due to the short duration and low ticket size of Borrow loans. However, the limited upside potential in estimates makes it difficult to be more optimistic about the stock in the near term.
In another report released on October 1, TR | OpenAI – 4o also reiterated a Hold rating on the stock with a $78.00 price target.