12:42 PM EDT, 04/30/2024 (MT Newswires) -- Block (SQ) is facing growth challenges in the medium term, particularly for its Cash App service, Morgan Stanley said in a report Tuesday ahead of the company's Q1 results.

The firm said investors have been generally upbeat heading into the print as they look for an upward revision to 2024 EBITDA guidance and a sustained outperformance while expecting Cash App to drive monetization with more banking services, including Direct Deposit.

Morgan Stanley, however, offers a less optimistic view about the company's Cash App and Square Seller services.

"We see limited opportunity for Cash App to increase gross profit contribution from a new credit card, additional debit

card adoption, or new users based on our deeper demographic analysis," it said. "We also expect medium-term challenges to accelerating Square Seller's growth which has slowed to the rate of incumbents."

The firm also believes that expectations for Block's ongoing profit outperformance have largely been priced in.

Morgan Stanley reiterated its underweight rating on the stock with price target of $60.

Price: 72.95, Change: -2.36, Percent Change: -3.13