Block off to the races in 2023

Thanks to a Wall Street analyst, payments company Block is off to a positive start in 2023. Baird upgraded SQ shares to an “outperform” rating from neutral and catapulted its price target from $62 to $78. The stock is now hovering at slightly over $65 per share.

Baird analysts: “The Street loves a comeback story.” After a rocky last year in which Square’s stock shaved off more than 60 per cent of its value, they believe that this fintech is poised for its comeback. The experts point to macro trends in the economy as catalysts, including rising interest rates and inflation, all of which should strengthen margins.

Ultimately, Baird believes that sentiment around Jack Dorsey’s payments company will improve amid growth that “should remain good in 2023” while margins ramp up.

Shares of Block rose approximately 3 per cent on the vote of confidence yesterday, climbing as high as $67 in response before retreating. The gains spilt over into Wednesday, with the stock still in the green in pre-market trading.

Block was the rising tide that lifted other fintech boats early in the week, with shares of Mastercard, Visa, and PayPal also starting off the year on a high note.

As a former Google exec

in a Stream by AlphaSense report, Block is one of the few companies that actually pose a threat to card giants Visa and Mastercard, with the ability to capture more of the payments market share pie.

The fintech’s Cash App product has attracted more than 50 million users in the US, many of whom have foregone banks in favour of the app as their primary account. Considering that Square handles payments between users and merchants, Visa and Mastercard are left out of the transaction.

One wildcard for Block in 2023 is bitcoin, which has been a revenue driver for the Cash App during bull markets. However, last year's crypto winter took a toll on Block’s bitcoin revenue. And with crypto still stuck in the doldrums, Block’s bitcoin revenue and profits remain vulnerable to customer demand.

PayPal shares were up nearly 4 per cent on Tuesday, buoyed by an analyst upgrade of their own. Truist raised its rating on the stock to “buy,”

a potential for the company to surpass earnings estimates in 2023 and 2024 and attaching a $95 price target on the PYPL stock.

With analysts bullish on SQ and PYPL stocks in 2023, fintechs could not ask for much more. However, it's still early and whether the positive sentiment will persist throughout the year is anybody's guess.