Wolfe Research’s analysts increased their price target for Block (NYSE:SQ) to $100 from $95, while continuing to recommend an Outperform rating. The analysts highlighted the importance of Direct Deposit (DD) users in contributing to Block’s success. The analysis suggests that currently, DD users likely deposit less than half of the average earnings of Gen Z and Millennials into Cash App, using it more for secondary income streams.
The analysts pointed out that Cash App’s efforts to become the primary banking choice for users could significantly boost its financials. Specifically, if Cash App can attract an additional 1 million new DD users annually, there could be over a 4% increase in total Gross Profit by fiscal 2025. This growth is underpinned by the fact that DD users contribute approximately $5,000 in inflows each quarter, markedly higher than the roughly $1,000 from non-DD users, indicating a potential four to fivefold increase in inflows.