Square Inc (SQ) Gets a Price Target Lift on Expectations for More Rapid-Fire Growth Ahead

Joseph Foresi boosts his price target on SQ by $10 as the company captures more market share.


Everyone on the Street is talking about Square Inc (NYSE:SQ) after the mobile payments company had a strong third quarter, beating out expectations while also boosting both full year guides for profit as well as revenue. Yet, investors must have been in a mood, as shares nonetheless dipped rather than soaring after such encouraging performance in bringing bigger merchants to the table.

Today, the stock is on its way back as voices across Wall Street sound off with confidence on the tech player, including Cantor analyst Joseph Foresi, who sees reason to become even more bullish on the stock’s prospects.

“Revenue growth accelerates as global payment volumes continue strong momentum,” writes the analyst, maintaining an Overweight rating on SQ stock while bumping up the price target from $31 to $41, which implies a close to 11% increase from current levels. (To watch Foresi’s track record, click here)

Co-founded and guided under Jack Dorsey, Twitter’s Chief Executive, Square saw a 33.3% year-over-year rise in revenue to $585 million in its third quarter, outclassing the analyst’s projection of $570 million as well as FactSet consensus of $572 million. Adjusted revenue experienced 46.6% year-over-year growth to $257 million, topping the analyst’s expectations of $243 million and FactSet consensus of $245 million. In a quarter with many strong points, adjusted EBITDA margins likewise climbed to 13.3% with adjusted EPS of $0.07, reaching past the analyst’s and consensus forecasts of $0.05.

For the fourth quarter, the SQ team expects adjusted revenue to $262 to $265 million, which would suggest 36.5% and 38.1% growth year-over-year, flying past the analyst’s expectations of $263 million and previous consensus of $255 million. Adjusted EPS estimates have been set to $0.05 and $0.06, compared to the analyst’s projection and consensus of $0.06. For the year, the SQ team has jumped its adjusted revenue guide from a prior range of $925 to $935 million up to $963 to $966 million, indicating 40.3% to 40.7% growth year-over-year, compared to the analyst’s projection of $965 million and past consensus of $944 million. Adjusted EPS expectations likewise see a hike for the full year, increasing from a range of $0.21 to $0.23 up to $0.24 to $0.25, compared to the analyst’s and consensus estimates of $0.25.

Foresi underscores, “We are attracted to the company‚Äôs increasing market penetration, end user growth and improving margin profile, driven by SG&A leverage and an increasing margin contribution from other services. Square reported results above expectations and raised full year revenue and EPS expectations. Gross Payment Volumes growth continued to see out-sized growth in the period. We expect rapid growth to continue and further margin expansion going forward, driving stock performance.”

Wall Street is split between the bullish and the cautious when it comes to the mobile payments company, as TipRanks analytics demonstrate SQ as a Buy. Out of 19 analysts polled by TipRanks in the last 3 months, 11 are bullish on Square stock while 8 remain sidelined. With a loss potential of nearly 5%, the stock’s consensus target price stands at $35.59.