TLDR
- Morgan Stanley upgraded Block (XYZ) to Buy, raising its price target to $93 from $72, citing faster growth and an expanded total addressable market.
- Block announced a ~40% workforce reduction, cutting to roughly 6,000 employees, with AI expected to replace much of the work.
- Bank of America raised its price target to $86 from $75, highlighting expected 18% gross profit growth in 2026 and adjusted operating income margin rising to 26%.
- Cash App gross profit rose 33% in Q4, monthly active users hit 59 million, and consumer lending originations jumped 69% year over year.
- Wall Street holds a Strong Buy consensus on XYZ, with an average price target of $86.08, implying ~58% upside.
Block’s stock surged roughly 17% in Friday pre-market trading after CEO Jack Dorsey announced the company would cut its workforce by about 40%.
The move will bring headcount down to around 6,000 employees, with Block leaning on AI to absorb the work left behind.
Morgan Stanley analyst James Faucette was quick to upgrade XYZ from Hold to Buy, setting a new price target of $93, up from $72.
Faucette pointed to what he called “faster growth and an expanded TAM,” noting that product improvements and more flexible pricing have opened up new parts of the market for Block.
He revised his 2026 EPS estimate up to $3.81 from $3.19, and his 2027 estimate to $5.19 from $4.10.
Morgan Stanley‘s $93 target is based on 18 times 2027 adjusted EPS. The bank noted that even this may be conservative, given expected revenue acceleration and roughly 26% EPS growth in 2027.
Dorsey wrote in a shareholder letter that over 4,000 employees are being asked to leave or enter into consultation. CFO Amrita Ahuja framed the cuts as positioning Block for its “next phase of long-term growth.”
Management was clear that the margin improvement is being driven by the business getting better, not by cutting in response to weakness. That’s a distinction the market seemed to appreciate.
Cash App and Lending Show Strong Momentum
Cash App gross profit climbed 33% in Q4 2025, and monthly active users grew to 59 million from 57 million in 2024.
Cash App added 1 million primary banking actives in Q4 alone, bringing that total to 9.3 million.
Consumer lending originations were up 69% year over year in Q4, while Cash App Borrow originations jumped 223%.
On the Seller side, pricing changes have pulled in larger merchants and improved the uptake of additional services. Seller gross payment volume has been accelerating since Q2 2025.
Overall gross profit rose 24% in Q4 2025 — a notable recovery from the slowdown between 2022 and 2024, when growth had fallen to 18%.
Analysts Back the AI Pivot
Bank of America’s Jason Kupferberg raised his price target to $86 from $75 and kept his Buy rating in place.
He flagged that Block expects 18% gross profit growth in 2026, even as it cuts 40% of staff, and that adjusted operating income margin is set to rise to 26% from 20% last year.
Kupferberg said the “key debate” is whether a smaller, AI-powered team can actually deliver. For now, he thinks investors are voting yes.
Wall Street’s overall consensus on XYZ is Strong Buy, built on 24 Buy ratings, two Holds, and one Sell.
The average price target across analysts sits at $86.08, which implies about 58% upside from current levels.
Block is guiding for 18% gross profit growth in 2026, with Q4 2025 results already showing the business heading in that direction.
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