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Investing.com -- Macquarie downgraded Block Inc. to Neutral from Outperform on Monday, warning that continued weakness in consumer spending could weigh on growth in the near term.
The downgrade follows a softer-than-expected first quarter and a downward revision to the company’s full-year guidance.
“Cash App KPIs [are] showing fragility amid the uncertain macro outlook,” Macquarie analysts wrote. “We downgrade from Outperform to Neutral with scope for further softness in consumer potentially weighing in the interim.”
Block’s first-quarter revenue came in at $5.77 billion, falling short of Macquarie’s estimate of $6.2 billion and FactSet consensus.
The miss was “partially btc driven,” analysts noted, with both Bitcoin trading volumes and Cash App activity underperforming.
Gross profit was $2.29 billion, also below expectations, while total gross payment volume (GPV) of $56.8 billion missed estimates of $58.7 billion.
Management attributed the weaker results to changing consumer spend dynamics over the quarter, particularly a decline in Cash App inflows and card spending.
While adjusted EBITDA beat expectations at $813 million, thanks to “disciplined” cost management, the company reduced its full-year guidance.
Block now expects gross profit to grow 12% in 2025, down from its prior “at least 15%” target. Adjusted operating income was also revised down to $1.9 billion from $2.1 billion. Macquarie now sees Block delivering a “Rule of 31” (revenue growth plus profit margin), down from a previous estimate of 35.5.
Second-quarter guidance calls for 9.5% gross profit growth and $450 million in adjusted operating income, implying a “Rule of 28.”
Macquarie also slashed its target price from $110 to $50, citing reduced earnings estimates and a lower valuation multiple.
While analysts acknowledged long-term potential from new product initiatives and crypto efforts, they concluded: “The uncertain macro outlook over recent months sees us throwing in the towel on markedly better growth for now.”
