TLDR
- Morgan Stanley upgraded Block (XYZ) to Buy with a $93 price target, up from $72, citing faster growth prospects and expanded addressable market potential.
- Block announced a massive ~40% workforce reduction, cutting headcount to around 6,000 employees, with AI technology replacing many of the eliminated roles.
- Bank of America raised its price target to $86 from $75, pointing to expected 18% gross profit growth in 2026 and adjusted operating income margin expansion to 26%.
- Cash App gross profit jumped 33% in Q4, monthly active users hit 59 million, and consumer lending originations exploded 69% year-over-year.
- Analysts maintain a Strong Buy consensus on XYZ, with an average price target of $86.08, indicating roughly 58% upside from current levels.
Block’s stock price jumped approximately 17% in Friday’s pre-market trading after CEO Jack Dorsey unveiled plans for a dramatic 40% reduction in the company’s workforce.
The dramatic restructuring will bring total employee count down to approximately 6,000 people, with artificial intelligence systems taking over many of the functions previously performed by human workers.
Morgan Stanley analyst James Faucette quickly upgraded XYZ from Hold to Buy, setting a new $93 price target that marks a substantial jump from his previous $72 forecast.
Faucette pointed to “accelerated growth and an expanded TAM,” noting that product improvements and flexible pricing approaches have opened up new market opportunities that were previously inaccessible to Block.
His 2026 EPS estimate rose to $3.81 from $3.19, while his 2027 forecast jumped to $5.19 from $4.10.
Morgan Stanley‘s $93 target is based on 18 times the 2027 adjusted EPS estimate. The firm suggested this multiple could actually be conservative given the anticipated revenue trajectory and roughly 26% EPS growth expected in 2027.
In a shareholder letter, Dorsey revealed that over 4,000 employees are being laid off or entering consultation periods. CFO Amrita Ahuja described the cuts as positioning Block for its “next chapter of sustainable growth.”
Management stressed that margin improvements are driven by operational efficiency gains rather than simply slashing costs. This framing appeared to resonate well with investors.
Cash App and Lending Show Strong Momentum
Cash App gross profit grew 33% in Q4 2025, while monthly active users rose to 59 million from 57 million the previous year.
Cash App added 1 million primary banking actives in Q4 alone, bringing that total to 9.3 million.
Consumer lending originations grew 69% year-over-year in Q4, while Cash App Borrow originations skyrocketed 223%.
On the Seller side, pricing adjustments have attracted larger merchants and driven increased adoption of additional services. Seller gross payment volume has shown acceleration since Q2 2025.
Overall gross profit rose 24% in Q4 2025 — a notable improvement from the slowdown witnessed between 2022 and 2024, when growth had decelerated to 18%.
Analysts Back the AI Pivot
Bank of America analyst Jason Kupferberg raised his price target to $86 from $75 while maintaining his Buy rating.
He noted that Block expects 18% gross profit growth throughout 2026, even while cutting 40% of staff, and that adjusted operating income margin should reach 26% compared to last year’s 20%.
Kupferberg identified the “key question” as whether a smaller, AI-powered workforce can deliver on execution. For now, he believes investors are showing confidence.
Wall Street’s overall consensus on XYZ is Strong Buy, with 24 Buy ratings, two Holds, and one Sell rating.
The average analyst price target sits at $86.08, suggesting approximately 58% upside potential from current price levels.
Block has provided guidance for 18% gross profit growth in 2026, with Q4 2025 results already showing momentum toward that goal.
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