Investors discounted a difficult economy in 2022, which caused shares of Block (SQ +3.59%) and PayPal Holdings (PYPL +4.05%) to decline. However, two Wall Street analysts anticipate brighter times in the future. David Koning of Baird raised his rating for Block from Neutral to Outperform after remaining at that level for two years. Andrew Jeffrey of Truist, who had almost as long held a Hold rating on PayPal (PYPL), changed it to a Buy. For the fintech stocks, experts forecast gains of over 20%.

In contrast to the 19% decline in the S&P 500 (SPX +0.65%), shares of PayPal and Block declined 61% and 62%, respectively, in 2022 as investors lost interest in growth-oriented companies due to potential recession fears. Baird predicted that sentiment would improve in 2023, and both analysts pointed to the corporations’ cash reserves as an advantage. Koning’s justification is partly based on Block’s cash balance, which was $4.6 billion as of the third quarter’s November filing. According to him, this alone could contribute $160 million in income before taxes or nearly 20 cents in per-share earnings in 2023, assuming an average increase in interest rates of 2%. The Baird analyst increased the Block’s price target from $62 to $78.

Considering the market-share decline, expectations have now been revised. In calendar 2023, Truist projects an increase in PayPal’s revenue of 10.3%. Currently, 9.2% growth is predicted by the FactSet-tracked analysts, down from 15.1% at the close of 2021. The two analysts’ predictions strengthen the market’s current positive outlook. According to the most recent data on FactSet, over 70% of the analysts monitoring Block and PayPal recommend the businesses as Outperform or Buy.

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