Why Block Stock Topped the Market on Tuesday

What happened

Block ( SQ 5.17% ), the once white-hot fintech stock that has stumbled a bit lately, was well in favor with investors on Tuesday. After a noted analyst lifted his price target on the company’s shares, they rose more than 5% on the day.

So what

That analyst is Mizuho’s Dan Dolev, who bumped his Block target to $190 per share; previously it was $180. He’s maintaining his buy recommendation too.

Image source: Getty Images.

His raise is based on a survey conducted by Mizuho, which revealed that Block’s peer-to-peer (P2P) payments service Cash App was considered to be a “leading financial app” by parents of teenagers. More generally, the research indicated that over two-thirds of respondents had offspring that used P2P payment apps weekly or even daily. 

In Dolev’s estimation, if Cash App is indeed used widely by those young people, it could mean several million more monthly average users (MAUs) for the fintech company’s service. This would likely filter down into more revenue for the company, not to mention profit. The analyst believes it could bump the company’s gross profit by at least 2% this year.

Now what

“We estimate that Cash App may reach as many as 2-4 [million] of the [roughly] 20 [million] individuals aged 13-18 in the U.S.,” Dolev wrote in a new research note.

“This is implied by the survey results (35% of users with kids 13-18 reported giving their kids Cash App [times] 25% haircut for conservatism) as well as Cash App’s current share of the U.S. adult population (44 [million] MAUs represents [approximately] 25% share of more than 170 [million] individuals aged 18-65),” he added.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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