HSBC upgrades Block, cites 'material increase in earnings power

Investing.com -- HSBC has taken a more bullish stance on Block after Q4 2025 results, with analyst Saul Martinez sharply raising earnings estimates and lifting the bank’s target price to $77 from $70, upgrading the shares to Buy.

Martinez wrote that Block’s “material increase in earnings power and sizable valuation de-rating underpin [a] more constructive stance,” noting the stock now shows around 20% upside.

According to HSBC, the company’s plan to cut almost half its workforce is not a response to operational stress.

Martinez said the reduction is “not coming from a position of weakness; business and financial performance are healthy.”

Instead, HSBC argued that the move should “meaningfully increase its earnings power,” supported by strong gross profit growth and expanding operating margins.

The bank raised its 2026 adjusted operating earnings estimate by around 20% and lifted its 2026 adjusted EPS assumption by 16%, broadly in line with Block’s guidance.

Crucially, HSBC highlighted that earnings improvements are back-end loaded into late 2026, with management indicating that about 60% of adjusted operating earnings for 2026 will be generated in the second half of the year.

Martinez wrote that this implies “2027e consensus estimates are too low.”

HSBC’s updated Q4 2026 EPS estimate of $1.16 annualises to $4.61, just 4% below the current 2027 consensus. The bank now expects consensus to rise, saying its own 2027 forecasts are 6% to 9% above consensus. HSBC also introduced 2028 estimates as part of its revised outlook.

Martinez concluded that Block’s valuations “have de-rated materially in the past year,” creating what HSBC sees as an attractive risk-reward profile.

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