Square Remains On Track To Meet Longer-Term Expectations
Jefferies analysts retained their Buy rating on Square Inc (NYSE: SQ), saying the company remains on on track to meet their longer-term margin expectations, driven by strong upmarket, increased traction with ancillary offerings and maintaining stable overall take-rates.
"Although we expect the magnitude of adjusted EBITDA margin expansion embedded in 2016 guidance (1,200 bps of y/y improvement) will likely not be sustainable on a yearly basis, we believe SQ remains confident in their longer term guide of mid-30 percent," lead analyst Jason Kupferberg wrote in a note.
The analyst expects to see increased leverage from the marketing and G&A lines going forward, while the company could fetch higher gross margins for software-like products such as Instant Deposit.
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Meanwhile, the company's momentum with larger merchants is likely to continue. On its second quarter earnings call, Square disclosed 42 percent of volumes comes from merchants with annual revenue greater than $125,000 (up from a prior 39 percent).
"With that said, despite the focus on larger merchants we believe SQ is comfortable the overall take rate will remain generally stable as the vast majority of sellers are still on standard pricing and SQ is able to capture some increased pricing on new value-added products (such as Invoices)," Kupferberg highlighted.
In addition, the company is expected to focus more on International growth (Canada, Japan and Australia), given Square's new EMV/Contactless reader allows Square to look beyond mag-stripe markets.
At time of publication, Square was down 0.34 percent at $11.74.
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Latest Ratings for SQ
Aug 2016 | BTIG Research | Downgrades | Buy | Neutral |
Aug 2016 | Stifel Nicolaus | Upgrades | Hold | Buy |
Aug 2016 | Deutsche Bank | Maintains | Hold |
View More Analyst Ratings for SQ
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