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Bank of America tips 38% upside for Block shares. Here’s why

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Block Inc (ASX: SQ2) shares are edging higher today, up 0.84% to $145.57 per share.

While it’s early hours yet, Block shares trading on the ASX are trailing yesterday’s (overnight Aussie time) performance of their US-listed counterparts. Block closed 4.6% higher on the NYSE, at US$104.65 per share.

While that was a strong day for the global buy now, pay later (BNPL) giant, Bank of America forecasts more strength ahead.

Why investors will be eyeing the Afterpay integration

As you’re likely aware, United States-based Block acquired Aussie BNPL company Afterpay in January this year.

And how well that integration works will have a material impact on Block shares.

As the Australian Financial Review (AFR) reports, Bank of America believes that, among other core factors, “investor focus will also be on the integration of Afterpay, and we will be looking for more specifics regarding potential quantification of revenue synergies”.

Block will report its quarterly results on 5 May, with an investor day presentation scheduled for 18 May.

Tailwinds ahead?

Bank of America believes the quarterly results will offer some fresh tailwinds for Block shares.

“We continue to believe [Block] is well-positioned to be a long-term leader in the Super App race among various Fintechs,” it said.

The bank retained its buy rating on Block shares, though it cut its price target from US$157 to US$144 per share. Still, that’s 38% above yesterday’s closing price on the NYSE.

According to Bank of America (as quoted by the AFR):

We see ample synergies between Afterpay and SQ, particularly the ability to cross-pollinate the respective active user base at Cash App and Afterpay. For example, we note that Afterpay’s 19 million annual active customers (65% in US) will be able to make BNPL instalment payments directly in Cash App.

Meanwhile, Cash App customers will have the ability to discover Afterpay’s 122,000 merchants, while engaging in BNPL transactions within the Cash App platform.

How have Block shares been tracking?

It’s been a rough month for Block shares, down 28.8% since 29 March. By comparison, the S&P/ASX 200 Index (ASX: XJO) is down 0.6% for the month.

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