Block’s recent headcount reduction and accelerating profitability improvements position the stock for further gains, according to HSBC. The bank upgraded the payments technology stock to buy from hold. Analyst Saul Martinez also lifted his price target to $77 from $70, which signals upside of 19%. The stock soared 17% on Friday after it said it was laying off more than 4,000 employees from its total workforce of over 10,000 people. “We are choosing to shift how we operate at a time when our business is accelerating and we see an opportunity to move faster with smaller, highly talented teams using AI to automate more work,” CFO Amrita Ahuja said last week. XYZ 5D mountain XYZ 5-day chart Martinez said that Block’s headcount reduction is not coming from a position of weakness, but rather after a year of healthy financial and operating performance. The analyst said the downsizing should increase its earnings power, underpinning a more constructive stance on the name. “Materially raising earnings estimates after Q4 2025 results; accelerating profitability improvements bode well for 2027e,” he wrote. “Even though risks associated with the rapid growth in lending activity should be monitored, the combination of healthy gross profit growth, ample operating margin expansion, and a material de-rating of the stock in the past year (despite the rally since reporting Q4 2025 results) has led to an attractive risk-reward profile, in our view.” Meanwhile, Martinez sees upside to consensus for Block’s 2027 estimates. “Management noted that earnings power improvements from the headcount reduction would not be fully reflected until H2 2026, with c60% of the expected 2026 adjusted operating earnings occurring in H2 2026,” he said. “This suggests to us that ‘exit rate’ Q4 2026 adjusted EPS and operating earnings levels will make it clear that 2027e consensus estimates are too low.”
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Tuesday, September 22
