Compass Point initiated coverage on Block (NYSE:XYZ) with a Buy rating and an $80 price target, highlighting undervaluation in its Cash App segment and margin upside from lending expansion.
The analysts argued that investors currently assign Chime—a close comp to Cash App—20x 2027 EBITDA, suggesting significant re-rating potential for Cash App, which they estimate is effectively trading at around 10x EV/EBITDA or lower today. The firm’s sum-of-the-parts analysis assigns a 15x multiple on Cash App’s adjusted EBITDA (including stock-based compensation) and a 12.1x multiple on Square’s 2026 adjusted EBITDA.
Compass Point outlined three reasons to own Block shares: First, they see Cash App as meaningfully undervalued compared to Chime. Second, they expect Cash App gross profit to accelerate with the ramp-up of Cash App Borrow lending products. Third, their 2026 forecasts are around 3% ahead of consensus on gross profit and 10% above on adjusted EBITDA, reflecting anticipated operating leverage as the company leans further into higher-margin lending.
The firm believes investors have been waiting for a reacceleration in Block’s gross profit growth and expects this turn to start in the second half of 2025, positioning the stock for a meaningful upside revaluation.
