This Bull Sees a Bright Future Ahead for Square Inc; Here’s Why

Nomura's Dan Dolev's strong bullish call and price target jump on Square stock is sending shares rising 5% in trading today.


Square Inc (NYSE:SQ) shares are shooting up 5% today after Nomura analyst Dan Dolev has confidently come out with a research report making a bold prediction: this mobile payments company could be the next Amazon or Google.

Breaking down bottom-up DCF, the analyst wagers this tech player carries compelling “long-term potential,” and as such, the analyst reiterates a Buy rating on SQ stock while hiking the price target from $48 to $64, which implies a 50% upside from current levels. (To watch Dolev’s track record, click here)

“Margins should grow as SQ Capital & software gain importance,” writes the analyst, calling for roughly $3 billion worth in revenue from these services by the year 2027- an estimate that could even prove “conservative” on back of such powerhouse long-term EBITDA margin potential.

Bottom line, “In 10 years, SQ is likely to be a very different company helped by accelerating share gains from payment peers and relentless disruption of services like payroll and HR. Analogous to Amazon or Google in their early days, little of this upside is evident using conventional valuation methodologies. As such, we believe the appropriate way to value SQ is by using a bottom-up DCF, taking into account mix shift to large sellers, accelerating share gains, growing penetration of higher priced transaction types like virtual terminal and e-commerce, as well as high margin services like Square Capital and payroll. In sum, we believe that a looming positive inflection in GPV growth coupled with sustained long-term GPV CAGR of over 20% can help ensure that 2018 will be yet another phenomenal year for SQ,” Dolev wagers, upping the ante on his bullish tech bet.

TipRanks highlights an optimistic, yet apprehensive analyst consensus circling Square stock. Based on 25 analysts polled in the last 3 months, 13 rate a Buy on Square stock, 11 maintain a Hold, while 1 issues a Sell on the stock. The 12-month average price target stands at $41.48, suggesting nearly 3% in downside potential from where the stock is currently trading.

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