Block upgraded to Overweight from Equal Weight at Morgan Stanley

Morgan Stanley upgraded Block (XYZ) to Overweight from Equal Weight with a price target of $67, up from $65. The firm sees a “compelling” valuation at current share levels and low expectations for reaccelerated Square Seller growth. Its scenario analysis suggests a “3:1 bull-to-bear skew.” Block’s valuation “appears more compelling,” with macro risks well priced in and investor sentiment “decidedly mixed,” the analyst tells investors in a research note. Morgan Stanley believes most investors expect weak Square Seller trends in Q1 and potential for the outlook to be revised lower. The firm, however, is “slightly more optimistic,” noting spending and small business trend updates from payments companies suggest consistency in Q1. Further, Morgan’s internal checks among small business merchants suggest that Square’s product and service combination is modestly more favorably viewed than it had expected.