Block (XYZ) estimates are lowered slightly on more conservative Cash App assumptions in Q4 amid balanced expectations among investors ahead of Q2, Morgan Stanley said in a Monday note.

The report said improving Square execution and cost savings are likely to offset concerns around sentiment, tougher comparisons, and monetization levers in Cash App. The results are due Aug. 5.

The note pointed to factors including intense competition among short-term credit/Buy Now, Pay Later lenders within the younger

and lower-income demographics, and PayPal might become more aggressive with its offerings, for the lower Cash App estimates.

The report said sentiment has recently become more cautious, with most investors still expecting healthy fundamentals but seeing limited upside at the current valuation.

"We remain constructive on Square's Seller trajectory and comfortable with the pace of acceleration," the note said, pointing to stronger execution among larger merchants, and continued expansion of its sales distribution capabilities.

Morgan Stanley lowered its price target to $90 from $98 while maintaining its overweight rating.

Price: 81.90, Change: +0.66, Percent Change: +0.81