BTIG Names Top Pick After Strong Quarter and Raised Guidance

Block’s Q2 results beat expectations with adjusted EPS of $1.02/share, leading BTIG to name it a top pick and raise its price target to $100. Square gross profit rose 13.1% vs. Street expectations of 9.9% (including a 2% tariff reimbursement benefit), while Cash App delivered 31.6% growth vs. 27.4% estimates. BTIG also lifted fiscal 2026 gross profit guidance by $180M and raised its FY26/FY27 adjusted EPS estimates ~3% each, with confidence in sustaining mid-teens gross profit growth despite the stock’s +29% YTD run.

Analysis

The key read-through is not just “beat-and-raise,” but that Block is converting product investment into volume reacceleration without needing a macro tailwind. That matters because payment networks and consumer-fintech names are being judged on whether growth is cyclical or self-help; this print suggests Block can keep compounding even if discretionary spend slows, which should support estimate revisions and a higher terminal multiple over the next 1-3 quarters.

The market should discount the quality of the beat somewhat because part of the gross profit upside is not purely organic, so the first move is likely to overstate the durability of the trend. The cleaner signal is that monetization in both merchant and consumer surfaces is improving at the same time, which pressures lower-quality peers that rely on either slower product cadence or a narrower revenue base. That creates relative downside for names like PYPL and, to a lesser extent, Fiserv’s SMB exposure if share gains keep compounding.

Risk is that the guide-up is already doing much of the work for the next few months: if the next quarter only matches current Street, the stock can stall even if fundamentals stay solid. The real falsifier is a reversion in Square volume growth back below high-single digits or any pickup in Cash App credit losses/delinquencies, which would challenge the “mid-teens” growth narrative and likely compress the multiple. Over 6-18 months, the bigger issue is regulatory scrutiny around BNPL/lending monetization if Borrow scales faster than underwriting data can support.

Key Decisions for Investors

• Long XYZ on a post-earnings pullback or gap-fill toward the pre-breakout area; 3-6 month target remains a move toward/through the new Street target, with downside capped if the stock holds above the post-print support zone.
• Pair trade: long XYZ / short PYPL for 1-3 months as a relative-growth expression; Block has the cleaner reacceleration story while PYPL remains more exposed to incremental disappointment on engagement and take-rate expansion.
• If you want convexity, use a 3-6 month XYZ call spread instead of outright long stock; the setup is upside to revisions with limited tolerance for a flat next-quarter guide, so defined risk is preferable after a strong YTD run.
• Set an alert on Square GPV growth and Cash App Borrow loss trends into the next print; if GPV slips back below the high-single-digit range or credit costs inflect higher, reduce exposure quickly.
• Avoid adding aggressively on the initial gap if the stock opens materially higher; the cleaner entry is after the first-day digestion, because the next catalyst is estimate revisions rather than a fresh fundamental surprise.