Investing.com - Analysts at Piper Sandler have assumed coverage of shares of Block Inc (NYSE:SQ) with an Overweight rating and a $83 price target following the payment company’s Q3 results last week. On Monday, SQ shares were trading at $79.59, up 6.74% since Friday’s close.

Last week, Block reported Q3 earnings per share (EPS) of $0.88, in line with consensus estimates, and revenue of $5.98 billion, falling short of expectations for $6.24B.

Despite this, the analysts have taken note of the company’s “impressive” margin results. “SQ posted top line results that came in softer than expected during the third quarter… Conversely, Block achieved adjusted EBITDA results that came in much healthier than expected,” Piper Sandler observed.

The firm’s price target is based on a 19x CY25E EPS estimate. Block, which has “a robust track record” of innovation is expected to continue to innovate in the software-enabled payment ecosystem.

“We believe that Block should benefit from a continued secular shift to electronic payments, as well as being on the forefront of innovation, organized around its two business segments, which are centered around merchants/sellers (Square) and consumers (Cash App),” the analysts said.

Square, which represents 34% of Q3 revenues, 12% growth (FY23) and 47% gross margins (Q3), has “significant runway of growth” according to Piper Sandler, with an addressable market size of $130B+. The key metric the analysts said they will be focused on is gross payment volume (GPV) in addition to revenue growth and margin profile.

Meanwhile, CashApp represents 66% of revenues, 33% growth and 33% gross margins. With an addressable market size of $75B+, this part of the business too has room to grow. Piper will be focussed on revenue growth, margin profile and active user dynamics to assess progress.

“In our view, with these scaled ecosystems, Block has a unique opportunity to cross-pollinate its offerings between its business and consumer ecosystems. The company has made investments to unlock this opportunity, including its Afterpay (BNPL) acquisition. Further, we believe that its early entry into Bitcoin has the potential to provide it upside in an emerging ecosystem,” the firm added.

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