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Has Square Soared Too High, Too Fast? Not According to This 5-Star Analyst

TipRanks

If you are looking for an out and out success story in 2020, look no further than fintech player Square (SQ). Since bottoming out on March 20, the stock has risen by a very impressive 303%. Along the way, the company's outsized performance has confounded analysts’ expectations, causing model revisions while the stock has showed no signs of slowing down.

The latest to give a positive tweak to their Square model is Deutsche Bank analyst Bryan Keane. The 5-star analyst reiterated a Buy rating on SQ shares, while boosting his price target from $140 to $180. What’s in it for investors? Upside of another 17%. (To watch Keane’s track record, click here)

Square’s market trouncing performance is backed by real world substance, as presented in the company’s blowout second quarter earnings report.

Amongst the many positives, the standout performance belonged to Square’s special sauce, its peer-to-peer payment service – the Cash App.

The App’s gross profit growth in the quarter accelerated from 116% year-over-year in Q1 to 167% year-over-year in Q2, as each month improved on the previous one’s performance, eventually reaching more than a 200% uptick through July. Significantly, Cash App users also increased from 24 million in 4Q19 to 30 million in June.

While past performance is in no way indicative of what lies ahead, Keane is quick to note that Square still presents a “significant opportunity for future growth.”

The analyst said, “Cash App has significantly outperformed during the current pandemic gaining new highly engaged customers to monetize and accelerate product adoption through cross-sell. Importantly, although some of the stimulus benefits will inevitably fade over time, the pandemic has positively driven an acceleration in the adoption of digital financial services, software-based business solutions, and omni-channel capabilities, which believe will have lasting positive effects on SQ’s growth rates. Our upside analysis points to significant potential near-term tailwinds and sustainably higher long-term growth rates coming out of the pandemic.”

Considering Square’s prospects, Keane’s colleagues take a more cautious approach. Based on 13 Buys, 15 Holds and 2 Sells, the fintech highflyer has a Moderate Buy consensus rating. Meanwhile, the $143 average price target, indicates shares will decline by 7%. (See SQ stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

This article was originally posted on TipRanks.