Block Inc.: Unlocking Synergies for Soaring Stock

BTIG analyst Andrew Harte believes that Block Inc., a conglomerate of various businesses, has the potential to achieve significant growth by enhancing synergies among its subsidiaries. This view has led him to upgrade Block's stock (SQ) from neutral to buy, and he has set a new price target of $85 per share, representing a 22% increase from its current levels.

Harte's investment thesis revolves around Square's advantageous position in the consumer and merchant space through its Cash App and Square ecosystems. He anticipates that integration between these segments will strengthen each individually, creating a virtuous cycle of growth. In a note to clients, he highlights the company's intention to prioritize meaningful integrations throughout 2024, aligning with recent remarks from Jack Dorsey, Block's CEO. In the shareholder letter, Dorsey expressed optimism about the increasing visibility of Square within Cash App and vice versa.

Apart from the potential synergies, Harte also underscores the promising outlook for each subsidiary on its own. Cash App is expected to maintain its position as a premier banking substitute, with significant growth opportunities stemming from increased engagement among existing customers. Interestingly, only a small fraction of the app's 55 million monthly active users currently utilize the Borrow lending feature.

In addition, Harte finds encouragement in Dorsey's expanded role, as he now oversees both the Square merchant unit and the broader company. This consolidation of responsibilities suggests a commitment to innovation and productivity enhancement within both Cash App and Square. Harte notes Dorsey's anticipation of major breakthroughs in 2024, particularly in the seller platform, with a focus on driving growth through banking-related products.

Shortly after Tuesday's market opening, Block shares experienced a 1.6% increase, reflecting growing investor confidence in the company's potential.