Block Jumps After Truist and Rothschild Upgrades
Block shares rose after receiving two upgrades in one day, with analysts pointing to Cash App growth and margin expansion from aggressive cost cuts.
Block shares climbed after both Truist Securities and Rothschild upgraded the stock to Buy on the same day. The double endorsement signals growing confidence that Jack Dorsey's aggressive restructuring is paying off.
Truist analyst Matthew Coad raised his rating from Hold to Buy and lifted his price target from $72 to $77. He sees mid-single to high-single digit upside to Street earnings estimates for outer years, driven by Cash App growth, better margin expansion, and share buybacks.
The timing matters. Block recently slashed its workforce by nearly 40%, cutting headcount from 10,000 to under 6,000 employees. That's a brutal reduction, but Wall Street is starting to see the numbers work.
The Bull Case
Cash App remains the growth engine. The peer-to-peer payments platform has expanded beyond simple transfers into banking services, investing, and Bitcoin trading. Gross profit from Cash App has outpaced Square's merchant business for several quarters now.
Truist's Coad highlighted Cash App and Proto gross profit gains as key drivers. Proto is Block's AI initiative aimed at automating internal operations and customer service. It's part of Dorsey's bet that a leaner, AI-augmented company can deliver better margins without sacrificing growth.
The margin story is real. After years of aggressive hiring and expansion, Block is finally showing operating leverage. Q4 earnings beat estimates, and the company raised its 2026 guidance.
The Restructuring
The job cuts weren't subtle. Dorsey's approach has been to dramatically reduce headcount and rely on automation to fill gaps. It's a high-risk strategy that assumes AI tools can replace human functions at scale.
So far, the market is rewarding the bet. Block shares have recovered from their 2025 lows, though they remain well below the pandemic-era highs when fintech valuations went parabolic.
The upgrade comes as fintech broadly faces pressure from higher rates and tighter consumer credit. Many payment companies that thrived in the zero-rate era have struggled to adjust. Block's willingness to cut deep may give it an edge over competitors still carrying bloated cost structures.
What to Watch
The next test is execution. Can Block maintain growth with 40% fewer employees? Cash App's user engagement metrics will be critical in upcoming quarters. Any sign that service quality is slipping could undermine the efficiency narrative.
Competition is also intensifying. PayPal, Apple Pay, and traditional banks are all pushing into the same digital payments space. Block needs Cash App to keep adding users and expanding wallet share to justify its current multiple.
For now, the Street is giving Dorsey the benefit of the doubt. Two upgrades in one day isn't a daily occurrence. The message is clear: the cuts were painful, but they might have been necessary.
Block trades around $72, putting it at Truist's prior target and below the new $77 mark. If margin expansion continues, there's room to run. If growth stalls, the lean operation becomes a liability.