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H&R Block spikes after earnings beat; Piper analysts see 'upside'

H&R Block
Andrew Burton | Getty Images

Shares of H&R Block spiked 12 percent Friday after the tax-preparation firm reported adjusted quarterly profits that beat estimates, as well as a 10 percent dividend increase.

Analysts at Piper Jaffray maintained their "overweight" rating on the stock, saying: "we see intriguing upside potential in the context of HRB's depressed multiple on depressed earnings, plans to recapture early season filers, and management's reiterated long-term EBITDA margin targets."

That said, they also cut their price target on H&R Block to $29 from $31 a share, noting a weak 2016 tax season.

"H&R Block's F4Q release acknowledged the disappointing 2016 tax season and the need for structural changes to avoid a similar loss of market share, but was light on specific details around actions to improve volumes and cost savings flow-through," according to a Friday note to clients.

Piper Jaffray also said it expects "HRB to potentially introduce its own fee-free Refund Anticipation Loan-like products as a promotional tool" in an effort to improve volumes and cost, echoing H&R Block President and CEO Bill Cobb's comments.

"Going forward, we are committed to arresting the client decline and ultimately achieving client growth. We are developing aggressive plans for tax season 2017 that we believe will enable us to achieve this objective," Cobb said.

Over the past six months, the firm has seen its stock decline 27 percent, and held near $24 on Friday.

HRB 6-month:

Disclosure: Piper "usually" provides bids and offers for H&R Block.