Analysts Expect At Least 60% Upside In This Fintech

Key Points

• Shares of Block have been on the decline since March, but it looks like a bottom might soon be in. 
• CEO Jack Dorsey is making some impactful changes, and analysts are impressed. 
• Two analyst updates from the past month alone call for more than 60% upside potential.

After softening over the past couple of weeks, there was a sense in yesterday's session that perhaps the market is ready to turn north once again. The benchmark indices all had some of their best days in recent weeks, with the S&P 500 finishing up 1.5% and the tech-heavy NASDAQ finishing up more than 3%. 

The market-wide correction over recent weeks, felt most acutely by tech stocks, has opened up some serious buying opportunities. One more to add to this list now is Block, Inc. NYSE: SQ, the $40 billion fintech company founded by Jack Dorsey.  

While most stocks started giving up their gains in late June or early July, Block began to run out of momentum from its run from Q4 through Q1 in late March. It had added about 120% since November of last year, but since the end of Q1 through this week, it had given back more than 30% of that. 

Bullish Updates for Block

However, it's starting to look like the worst-case scenario might already be priced in, and a bottom might soon be approaching. Such was the feeling from the team at Macquarie, who, at the end of last week, reiterated their Outperform rating on Block shares and maintained their $100 price target. From the $62 that Block shares closed at on Wednesday evening, that's pointing to an impressive upside of more than 60%. 

They're not alone, either. The Deutsche Bank team took a similar stance on Block shares earlier this month, boosting their price target to $98. Susquehanna did the same at the end of June but with a $100 price target like Macquarie. 

Earlier this month, William Blair upgraded the stock from Market Perform to Outperform for the same reasons as the others. In a note to clients, they said, "CEO Jack Dorsey is injecting new energy into a business that had become complacent, despite technology leadership." They see the fintech company continuing to emerge as an "important neo-bank leader," with several interesting new revenue-generating products set to come online this year and make an impact. 

Block's Positive Momentum

A week later, Jack Dorsey himself announced plans to reorganize Block's staff by function to eliminate operational inefficiencies. By disbanding the business unit reporting structure, Block will be run more closely to how it was when Dorsey founded it in 2009. Considering the company managed to log more than 3,000% in gains from its IPO in 2016 through 2021, it's safe to say Dorsey knows what it takes to make a company run. 

It's worth noting that not all analysts see the upside potential in Block, with Morgan Stanley reiterating their Underweight rating on its shares earlier this week. However, they are the exception rather than the rule, with MarketBeat's Analyst Rating Tool showing theirs to be the single Sell rating against 28 Buys. 

Key Considerations for Investing in Block

For those of us on the sidelines thinking about getting involved, this could be ground zero for a remarkable comeback. The stock has refused to fall below the $60 mark this week after coming close to closing below it on Friday. Yesterday's 3% pop could easily become something bigger, especially with Block's Relative Strength Index (RSI) still only at 40.

A stock's RSI is a popular indicator used to assess whether it is overbought or oversold. Anything above 70 suggests the former, while anything below 30 suggests the latter. While it suggests that Block isn't extremely oversold, at just 40, it definitely helps strengthen the argument that there's a bargain to be had at current levels.