TLDR
- Morgan Stanley upgraded Block (XYZ) to Buy with a $93 price target, up from $72, citing faster growth prospects and expanded addressable market potential.
- Block announced a dramatic ~40% workforce reduction, cutting staff to around 6,000 employees, with AI technology expected to absorb much of the eliminated work.
- Bank of America raised its price target to $86 from $75, highlighting anticipated 18% gross profit growth in 2026 and operating margin expansion to 26%.
- Cash App gross profit jumped 33% in Q4, with monthly active users hitting 59 million and consumer lending originations up 69% year-over-year.
- Analysts maintain a Strong Buy consensus on XYZ with an average price target of $86.08, implying roughly 58% upside from current levels.
Block’s stock surged approximately 17% in Friday’s pre-market trading after CEO Jack Dorsey unveiled plans for a dramatic 40% workforce reduction.
The company’s headcount will shrink to approximately 6,000 employees, with artificial intelligence technology expected to absorb the workload previously handled by departing staff.
Morgan Stanley analyst James Faucette quickly upgraded XYZ from Hold to Buy, setting a new $93 price target that marks a substantial jump from the prior $72 estimate.
Faucette pointed to “accelerated growth and an expanded TAM,” noting that product improvements and flexible pricing approaches have opened new market opportunities for Block that were previously inaccessible.
His 2026 EPS estimate rose to $3.81 from $3.19, while the 2027 forecast jumped to $5.19 from $4.10.
Morgan Stanley‘s $93 target represents 18 times the firm’s 2027 adjusted EPS estimate. The analyst noted this multiple could prove modest given projected revenue acceleration and roughly 26% EPS growth anticipated for 2027.
In a shareholder letter, Dorsey revealed that over 4,000 employees are being terminated or entering consultation periods. CFO Amrita Ahuja described the cuts as positioning Block for its “next chapter of sustainable growth.”
Executives stressed that margin improvements result from operational efficiency gains rather than defensive cost reductions. This framing appeared to resonate well with investors.
Cash App and Lending Show Strong Momentum
Cash App gross profit grew 33% in Q4 2025, with monthly active users climbing to 59 million from 57 million a year earlier.
The platform added 1 million primary banking actives in Q4 alone, bringing that total to 9.3 million.
Consumer lending originations grew 69% year-over-year in Q4, while Cash App Borrow originations skyrocketed 223%.
On the Seller side, pricing adjustments have attracted larger merchants and boosted adoption of additional services. Seller gross payment volume has accelerated since Q2 2025.
Overall gross profit rose 24% in Q4 2025 — a significant improvement from the slowdown seen between 2022 and 2024, when growth had decelerated to 18%.
Analysts Back the AI Pivot
Bank of America analyst Jason Kupferberg raised his price target to $86 from $75 while reiterating his Buy rating.
He noted that Block expects 18% gross profit expansion through 2026 despite the 40% headcount reduction, with adjusted operating margin projected to reach 26% versus 20% last year.
Kupferberg framed the “key question” as whether a smaller, AI-powered team can deliver on execution. For now, he believes investors are voting yes.
The Wall Street consensus on XYZ remains Strong Buy, with 24 Buy ratings, two Holds, and one Sell.
The average analyst price target sits at $86.08, suggesting approximately 58% upside potential from current price levels.
Block has provided guidance calling for 18% gross profit growth in 2026, with Q4 2025 results already showing momentum toward that goal.
