Evercore ISI maintains Outperform on Block stock amid loan loss concerns

Evercore ISI maintained an Outperform rating and a $105 price target on Block, versus a stated share price of $76.22, citing expected high-teens gross profit growth. Ahead of the November 3 earnings report, it expects transaction and loan losses to rise 7% sequentially to $626 million, above the $570 million consensus, as Cash App Borrow loan duration extends from four to six weeks; higher fees are expected to outpace losses on a per-loan basis. Analysts’ views are mixed: Morgan Stanley cut its rating to Equalweight and target to $80, while Baird raised its target to $106 and other firms reiterated positive ratings.

Analysis

The important question is whether a higher reported loss line reflects profitable loan duration extension or deteriorating credit quality. If fees rise faster than losses on comparable loan vintages, the headline loss increase could obscure improving unit economics; if losses mature later or worsen by borrower cohort, today’s apparent pricing benefit may be borrowed from future quarters. The earnings call therefore matters more for disclosure quality—vintage loss curves, repeat-borrower performance, and fee yield—than for the aggregate loss figure alone.

Near term, the disagreement among analysts and the cited roughly 9% options-implied move point to event risk, not a directional signal. The bullish gross-profit and operating-leverage case remains conditional on execution; neither analyst targets nor upward estimate revisions establish that the loan economics are durable. Over 1–3 months, clear cohort data and stable credit performance could let investors look through a one-quarter loss increase. Over 6–18 months, sustained consumer stress or delayed loss emergence could reverse that interpretation and pressure growth quality and the valuation multiple. The thesis is falsified if losses continue outrunning fee growth, credit metrics deteriorate across vintages, or management cannot reconcile reported losses with per-loan profitability.

Key Decisions for Investors

• Avoid taking a large directional XYZ position immediately ahead of earnings: the potential move is substantial, while the available options figure gives no indication of direction and option pricing/skew are not provided.
• Treat XYZ as a conditional post-report long only if management provides comparable-vintage evidence that fee growth exceeds loss growth and the market accepts the explanation. Size against the possibility that credit deterioration, rather than duration mix, is driving the loss increase.
• If the loss line rises without transparent cohort and unit-economics support, avoid adding or reduce exposure; monitor subsequent reports for losses consistently outpacing fee growth and for deterioration in borrower performance.
• Do not infer a trade from the analyst target spread alone. The Morgan Stanley rating action is a research view on XYZ, not evidence of company-specific exposure for Morgan Stanley (MS).