Evercore ISI says this beat-down fintech stock can stage a recovery rally

Evercore ISI upgraded Block to outperform with a price target of $75, implying a 21.4% upside from Monday's close, driven by reassurances regarding Cash App's lending strategy and steady spending trends among lower-end consumers. Analyst Adam Frisch cited management's less aggressive lending approach than initially feared after Q1 earnings, allaying concerns about significant losses in the second half of 2025. The upgrade also reflects confidence in new product releases and an attractive valuation, despite the stock's 27% decline year-to-date.

Analysis

Evercore ISI has upgraded Block, Inc. (SQ) to "outperform" from "in line," increasing its price target by $17 to $75, which suggests a potential 21.4% upside from the previous day's closing price. This bullish revision stems from a reassessment of Block's business fundamentals, particularly concerning its Cash App platform's lending strategy. Analyst Adam Frisch indicated that initial concerns about Block's lending plans—which were discussed on the first-quarter earnings call and included increasing lending to new consumers, in new states, and with higher limits—were alleviated following subsequent conversations with management. These discussions assuaged fears that a strategy to become more aggressive on lending to offset lower spending levels would lead to significant losses in the second half of 2025 or beyond, by clarifying a less aggressive lending posture than initially feared and highlighting the diversification of lending losses across a broader investor base, thereby mitigating direct financial risk to Block. Further bolstering the upgraded outlook are observations of steady spending trends among lower-end consumers despite macroeconomic uncertainties, anticipated growth contributions from new product releases, and an attractive valuation for SQ shares. Despite Block's stock having declined over 27% year-to-date, though it experienced a more than 3% rise in premarket trading on the day of the upgrade and a 5% bounce last week, this analyst action aligns with the majority of Wall Street's buy-equivalent ratings and sets a price target above the average.

Key Decisions for Investors

• The Evercore ISI upgrade, driven by a clarified, less aggressive lending outlook for Block's Cash App and diversified loss absorption mechanisms, suggests a reduction in a key perceived risk, potentially improving the stock's risk-reward profile.
• Considering Block's substantial year-to-date share price decline of over 27% against the analyst's revised $75 price target and positive commentary on consumer spending and product innovation, investors may find a compelling opportunity to re-evaluate the stock.
• Investors should closely monitor Block's upcoming earnings announcements and management updates for confirmation of the moderated lending strategy's execution and the actual impact of new products on growth trajectories to validate this renewed bullish sentiment.