BMO Capital analysts upgraded Block (NYSE:XYZ) from Market Perform to Outperform, raising the price target to $89 from $100, citing a compelling valuation and improved growth outlook for Square and Cash App.

Following the Q4 sell-off, the analysts see reduced downside risk in Street estimates, with sentiment and positioning becoming more balanced. Expectations for gross profit growth in Square and Cash App now appear more realistic, and with higher sales, marketing, and R&D expenses already priced in, the risk of further estimate cuts has diminished.

BMO Capital also believes investor sentiment could improve through 2025, driven by an acceleration in gross profit growth across Block’s core businesses. Additionally, Block’s valuation remains attractive, trading at a price-to-earnings growth (PEG) ratio below 0.7x, suggesting significant upside potential if estimates have stabilized.

With growth prospects looking stronger and downside risks appearing limited, BMO sees Block well-positioned for a recovery in 2025.