Looking For Stocks To Own Amid Rising Rates And High Inflation? Baird Says Block Is A 'Premier' Option

After locking in the worst performance of any stock under Baird's coverage umbrella in 2022, Block Inc SQ could be positioned to outperform in 2023. 

What Happened: Baird on Tuesday upgraded Block from Neutral to Outperform and raised the price target from $62 to $78, citing several potential catalysts ahead of the payments company. 

"SQ is a premier large-cap growth franchise with both profitability and net cash, while benefiting from macro trends such as rising rates (on big cash/subscriber funds) and inflation," Baird analysts wrote in a new note to clients. 

The analyst firm believed investors will rotate back into Block shares this year following more than 60% declines in 2022. Block faces easier comps across its businesses in 2023, Baird noted.

Baird highlighted Block's significant cash position totaling approximately $5 billion, as well as the company's $3 billion in customer funds, which could add to Block's bottom line as rates rise. 

The analyst firm also saw significant growth potential via an expansion of the company's merchant network, which should increase transaction-based revenues. Cash App was positioned for continued growth as well with its "multiple solutions that keep people coming back," Baird said.

Block offered a unified ecosystem of products and services which helped to differentiate it from the competition, Baird said. 

Baird slapped a bear case target of $55 on Block shares and a bull case target of $100.

"We think sentiment can improve as growth should remain good in 2023," the analysts said.

See Also: Here Are 10 Other Price Target Changes For Tuesday

SQ Price Action: Block has a 52-week high of $163.89 and a 52-week low of $51.34.

The stock was up 0.24% at $62.94 at the time of writing, according to Benzinga Pro.

Photo: Courtesy of Block.