Payment stocks Block and PayPal Holdings both experienced declines on Tuesday, but according to BMO Capital Markets analyst Rufus Hone, it may be too early to dismiss them.
Hone, who recently took over coverage of Block at the firm, maintained an Outperform rating on the shares despite cutting the price target to $84 from $93. Block’s shares were down 1% to $64.36 on Tuesday.
Hone also assumed coverage of PayPal, giving it a Market Perform rating along with a $65 price target. PayPal’s stock saw a decline of 3.2% to $57.92.
In his analysis, Hone expressed optimism for Block, the former Square company and owner of Cash App, despite the reduction in price target.
“We anticipate sustained growth in gross profit for both Cash App and Square Seller in the medium-term, alongside a stronger focus on improving margins,” Hone wrote.
While acknowledging the challenges in achieving SQ’s 2026 targets, Hone believes that there are opportunities for Block to achieve “quick wins” in cost optimization, which could positively impact investor sentiment in the near future.
Hone’s outlook for PayPal, however, was more cautious.
“PYPL shares have come under pressure due to concerns about market share loss, increased competition in unbranded processing, and slower e-commerce growth,” Hone said. He noted that although the stock is trading at a discounted value, significant growth in gross profit may be needed for a substantial increase in stock performance.
BMO predicts mid-single-digit growth for PayPal in 2024 and 2025, which falls short of Wall Street’s expectation of mid-to-high single-digit growth.
Year-to-date, Block’s shares have risen by 2.5%, while PayPal has experienced a 19% decline.
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