The Market Pays You to Shrink

Block’s stock jumped 6% on Tuesday. The catalyst wasn’t a product launch or a new market. It was the aftermath of firing 4,000 people. In February, CEO Jack Dorsey announced Block would cut its workforce from over 10,000 to under 6,000 — a 40% reduction — explicitly because “intelligence tools have changed what it means to build and run a company.” By this week, the market had rendered its verdict: multiple analyst upgrades, a Truist price target of $77, TD Cowen at $95, and Morgan Stanley reiterating Buy at $93. Block trades at a forward P/E of 16x on guidance of $3.20 billion adjusted operating income. Gross profit rose 26% year-over-year in Q4. The company is doing more with dramatically fewer humans, and the market loves it.