Block stock price target raised to $90 from $60 at JPMorgan on S&P 500 inclusion

JPMorgan has significantly raised its price target for Block Inc. (NYSE:XYZ) to $90 from $60, maintaining an Overweight rating, primarily driven by the company's imminent inclusion in the S&P 500 index effective July 23. This index addition is projected to generate substantial net indexer demand of 54.2 million shares, equivalent to 759% of current trading volume. While the new $90 target implies a 5x next-twelve-months gross profit multiple, a slight premium to Block's current 4x, it still positions the company at a discount compared to fintech peers trading at 7-9x multiples.

Analysis

JPMorgan has issued a significantly bullish update on Block Inc. (SQ), raising its price target to $90 from $60 and reiterating an Overweight rating. The primary catalyst for this revision is Block's scheduled inclusion in the S&P 500 index on July 23, which is expected to create a substantial demand-supply imbalance. JPMorgan's quantitative analysis projects a net indexer demand of 54.2 million shares, a figure representing a massive 759% of the stock's current trading volume, driven by 70.9 million shares of demand from S&P 500 funds, partially offset by 16.7 million shares of supply from S&P Composite index funds. The new $90 price target is underpinned by a 5x next-twelve-months gross profit multiple; while this is a premium to Block's current 4x multiple, it still positions the company at a notable discount to its fintech peers, which trade in the 7-9x range. This positive outlook is further supported by a 'GOOD' financial health score from InvestingPro, strong liquidity ratios, and ongoing business initiatives, including a new marketing campaign for Cash App and a product launch for Square in the UK market.

Key Decisions for Investors

• Investors should consider the significant, non-fundamental buying pressure expected from Block's S&P 500 inclusion on July 23, which could provide a strong near-term upward catalyst for the stock price.
• The stock's valuation, even at the new $90 price target, remains at a discount to fintech peers, suggesting potential for further multiple expansion if management continues to execute on growth initiatives.
• Monitor the stock's trading volume and price action leading up to and immediately following the July 23 index inclusion to gauge the actual impact of index fund rebalancing against the forecasted demand.