Block Inc. downgraded by Phillip Securities after shares surge

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Block Inc. downgraded by Phillip Securities after shares surge
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On Friday, Phillip Securities adjusted its stance on Block Inc. (NYSE: SQ), shifting the stock's rating from Buy to Accumulate. The firm also raised its price target for the company's shares from the previous $85.00 to a new target of $94.00. This change comes after a notable increase in Block's stock price.

The adjustment in rating is based on the recent performance of Block Inc.'s shares. Phillip Securities mentioned the decision to downgrade was influenced by the stock's recent price surge, which prompted a reassessment of the investment rating. Despite the downgrade, the firm acknowledges the positive aspects of Block Inc., including the increased adoption of Cash App banking products and lower operational expenses (OPEX).

Phillip Securities has also revised its financial projections for Block Inc. The firm has increased its revenue and adjusted profit after tax and minority interests (PATMI) estimates for the fiscal year 2024. The new estimates reflect a 2% rise in revenue and an 11% increase in adjusted PATMI, indicating a stronger financial outlook for the company.

The firm's decision to raise the price target is supported by a discounted cash flow (DCF) analysis, which remains grounded on an unchanged weighted average cost of capital (WACC) of 7.1% and a terminal growth rate of 4%. These constants in the valuation model suggest a stable view of the company's long-term financial health and risk profile.

Phillip Securities highlighted several catalysts that could positively impact Block Inc.'s performance. Among these are the potential for continued margin expansion and the ability of Block's Cash App to serve as an alternative banking solution for millions of lower-income and underbanked consumers. These factors are expected to contribute to the company's growth and financial success.

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