Morgan Stanley Upgrades Block Stock (XYZ) to Buy, Cites ‘Faster Growth and an Expanded TAM’

Shares of fintech Block XYZ +4.99% ▲ rallied about 17% in Friday’s pre-market trading as investors reacted positively to CEO Jack Dorsey’s decision to slash the company’s workforce by about 40%. Moreover, the company issued a solid outlook for Q1 and full-year 2026. Several analysts reacted positively to these developments, with Morgan Stanley analyst James Faucette upgrading XYZ stock to Buy from Hold and raising the price target to $93 from $72.

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Morgan Stanley Turns Bullish on Block Stock

Faucette upgraded Block stock, noting the company’s “faster growth and an expanded TAM” [total addressable market] following product enhancement and expansion. The 4-star analyst expects artificial intelligence (AI) to enhance profitability.

In reaction to the Q4 print and outlook, Faucette raised his 2026 earnings per share (EPS) estimate to $3.81 from $3.19 and 2027 estimate to $5.19 from $4.10.

Block’s move to cut jobs is expected to improve profitability and support the company’s strategy to move faster with smaller teams using AI to automate more work. In a letter to shareholders, Dorsey said that over 4,000 employees are being asked to leave or enter into consultation. Block CFO Amrita Ahuja said these layoffs will position the company for the next phase of its long-term growth.

Bank of America Analyst Raises Price Target

Meanwhile, Bank of America analyst Jason Kupferberg raised his price target for Block stock to $86 from $75 and reaffirmed a Buy rating. The analyst highlighted that the company expects to deliver 18% gross profit growth in 2026, while slashing headcount by 40%, powered by AI. He added that Block’s margin expansion is “dramatic,” with adjusted operating income margin expected to increase to 26% in 2026 from 20% last year.

Management attributed this margin improvement to the company’s “evolution” as the business improves, rather than to cost-cutting in response to weakness. Kupferberg noted that the company’s Q4 results reinforce this narrative, with Cash App’s gross profit rising 33% and the lending business expanding rapidly.

Kupferberg thinks that the “key debate is whether a smaller, AI‑powered workforce will succeed”. He added that as of now, investors are optimistic, as reflected in the surge in XYZ stock on the news. The analyst thinks that investors are applauding Block’s proactive AI stance.

Is Block a Good Stock to Buy?

Overall, Wall Street has a Strong Buy consensus rating on Block stock based on 24 Buys, two Holds, and one Sell recommendation. The average XYZ stock price target of $86.08 indicates 58% upside potential.

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