Block (XYZ): Why BNP Paribas' Outperform Call Signals a Golden Opportunity in H2 2025

BNP Paribas Exane's recent upgrade of Block (NYSE: XYZ) to Outperform with a $72 price target marks a pivotal moment for investors. The firm's bullish stance hinges on three critical pillars: accelerating gross profit growth, AI-driven innovation, and a shifting competitive landscape that could unlock outsized returns in the second half of 2025. While macroeconomic headwinds linger, Block's strategic recalibration—bolstered by its dual ecosystems (Square and Cash App) and emerging AI tools—positions it as a buy now, pay later (BNPL) leader undervalued relative to its growth potential.

The Gross Profit Growth Catalyst: Mid-Teens by Q4 2025

Block's Q1 2025 results underscore its ability to navigate choppy waters. Gross profit rose 9% year-over-year to $2.29 billion, with Square contributing 7.2% GPV growth and Cash App adding 10% gross profit gains. Management now aims for mid-teens gross profit growth by Q4 2025, achievable as competitive pressures in bitcoin and cash businesses ease. Two key catalysts will drive this acceleration:

1. Cash App Borrow's Nationwide Rollout: With FDIC approval, Borrow is now accessible to all U.S. users. This product—where users with direct deposits are 13x more likely to use it—is a high-margin revenue generator. Block's “bank our base” strategy, leveraging machine learning to deepen user engagement, could turn Cash App into a full-stack financial platform.
2. Proto's Ecosystem Integration: The upcoming Proto launch aims to integrate Block's tools (payments, loans, crypto) into a seamless experience, reducing customer churn and boosting retention.

AI as the Undervalued Wildcard: Goose and Beyond

Block's undervaluation becomes stark when considering its AI initiatives, notably the “Goose” agentic system. This proprietary tool, already boosting engineering productivity by 30%, could automate workflows, optimize pricing, and refine underwriting models for Cash App Borrow. The company is also expanding Bitcoin adoption, with plans to launch Lightning Network payments on Square by late 2025—a move that could capture $100B+ in annual crypto commerce revenue.

Valuation: A Bargain Compared to AI Peers

Block's enterprise value of $29 billion trades at just 1.2x its 2024 revenue of $24.1 billion, and 3.2x projected 2025 gross profit of $9.96 billion. In contrast, AI-focused stocks trade at 29.7x median revenue multiples, and even non-AI fintech peers like PayPal (PAYPal) command a 2.15 P/S ratio—nearly double Block's 1.37.

Analysts' $100.64 average price target implies 71% upside, while GuruFocus's $89.46 valuation suggests a 52% discount to current prices. This gap signals a rare opportunity to buy Block at a multi-decade valuation trough, even as its AI and financial services moats strengthen.

Risks, But Not Dealbreakers

Bearish arguments center on macroeconomic slowdowns, which prompted Block to lower its 2025 operating income guidance to $1.9 billion (19% margin). However, the company's $1.53 billion free cash flow and $7.5 billion cash hoard provide a buffer. Meanwhile, fintech rivals like PayPal and Shopify face their own headwinds, while Block's AI and Bitcoin plays carve out defensible niches.

Conclusion: Buy XYZ Now—H2 2025 Could Be Explosive

The risks are real, but the rewards are asymmetric. For investors with a 12–18-month horizon, Block is a must-own name in the AI-finance revolution.

Act now—before the market catches up.