Block's higher price for Instant Deposit should boost EBITDA, profit, Barclays says

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Barclays analyst Ramsey El-Assal increased his estimates for Block's(SQ +1.9%) gross profit and EBITDA as the fintech quietly raised the pricing on its Cash App's Instant Deposit feature, "one of Cash App's biggest drivers of gross profit."

The change "appears to be effectively a ~17% increase over prior rates," El-Assal wrote in a note to clients.

The price increase could produce an upside of $63M-$170M in FY2022 gross profit and could drive an EBITDA increase of 7.1%-19.1%, the analyst estimated.

According to Cash App's terms and conditions, the pricing for Instant Deposit is currently 0.5%-1.75%, with a minimum fee of $0.25. The range compares with its prior pricing of 1.5%. El-Assal estimates that most transactions will be at the high end of the range, based on Barclays usage of the app at varying transaction amounts.

El-Assal has an Overweight rating on Block (NYSE:SQ), which contrasts with the SA Quant rating of Sell and agrees with the average Wall Street rating of Buy. SA Authors' average rating is also Buy.

SA contributor The Digital Trend gives four reasons to add Block (SQ)