Block has 'unmatched disruption potential,' but PayPal dynamics limit near-term upside - TD Cowen

In separate notes Friday, TD Cowen analyst Bryan Bergin initiated Block (NYSE: SQ) with an Outperform rating and $59 price target and PayPal (NASDAQ: PYPL) with a Market Perform rating and $66 price target.

For Bergin and his firm, Block is a "well-rounded" company with "unmatched disruption potential."

"SQ boasts a fundamentally differentiated ecosystem in Fintech and the ability to grow & integrate its solutions makes it among the most likely to challenge industry norms," the analyst wrote.

TD Cowen expects "Cash App & Square initiatives to stabilize GP growth at ~20% in 2024," while they believe "disciplined investment promotes rising OM & FCF."

Bergin argues that the recent pressure on the stock is overdone, and the negative revisions have played out.

While TD Cowen acknowledges there are "catalysts aplenty" for PYPL, he states they are awaiting insights on the next chapter.

"PYPL is a leading fintech with an unmatched global network & leading consumer & merchant products, but ample uncertainty exists as staying on top is just as hard as getting there," the analyst contends.

"Low valuation & solid financials likely insulate downside. Catalysts may be many, but rely on ‘show-me’ story dynamics that are apt to limit meaningful NT upside," he added.

By Sam Boughedda

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