Nomura Analyst Likes What He Sees in Square (SQ) Cash App Momentum

Nomura's Dan Dolev is out with an upbeat research note with his app tracker revealing compelling growth in SQ Cash App.

Nomura analyst Dan Dolev is out with a positive research note on Square (NYSE:SQ), based on his Fintech App tracker’s results of U.S. P2P, Bitcoin, and POS. The verdict: the tracker points to a “surging” Cash App for Square, where downloads are outpacing Venmo and growth firing up in the latest months.

In reaction, the analyst reiterates a Buy rating on SQ stock with a $64 price target, which implies a 13% upside from current levels. (To watch Dolev’s track record, click here)

“In Bitcoin, while Coinbase downloads are slowing vs. peak, SQ remains balanced. For Point of Sale, app downloads are largely on an accelerating trend,” writes Dolev.

First, the analyst points out that SQ boasts roughly 28 million cumulative downloads, where the number of SQ Cash App downloads is merely about 1 million under Venmo’s levels; and meanwhile, “the spread between the two increasingly converges.”

Though the track record shows Venmo with a bigger download number than Square, this gap seems to have hit a peak last July between 5 and 6 million. Dolev highlights, “Since then, SQ Cash growth exceeded Venmo, averaging +128% since early 2016 vs. +74%, which narrowed the cumulative gap to ~1mn.”

Meanwhile, Square’s momentum seems to have kickstarted before Bitcoin, with the download acceleration in the app hitting before SQ Cash APP welcomed in broad-based Bitcoin trading at the start of 2018. For proof of this, Dolev draws attention the period between January 2016 and June 2017 year-over-year growth in SQ Cash downloads reached an average of 114%, with growth ramping up to 154% last year between July and December. “As a reminder, while app downloads are important, they are not the only yardstick as they do not capture usage or monetization,” adds the analyst, who mentions that in December, SQ Cash tapped around 7 million monthly active users, or roughly 35% of the cumulative downloads.

“As Coinbase slows from peak, SQ remains strong,” continues Dolev, who believes: “With SQ Cash App now open for Bitcoin trading in most states, comparing its growth vs. the popular Coinbase app is noteworthy. Here, while Coinbase saw growth peak around the holiday time – as Bitcoin prices spiked – Coinbase’s growth has slowed from record levels, whereas SQ Cash App experienced more balanced growth.”

On a closing note of enthusiasm, “SQ point of sale app downloads nearly tripled since 2015, Dolev contends, “Assessing SQ Point of Sale (POS) app downloads over time shows that cumulative downloads have nearly tripled since early 2015, with Y/Y growth appearing on an improving trend.”

Is Wall Street confident or pessimistic on this tech stock’s success in the market? TipRanks reveals 17 out of 29 analysts polled in the last 3 months are betting on SQ stock with a Buy rating, 10 remain sidelined, while 2 are bearish on the stock. Yet, the 12-month average price target of $50.38 suggests caution is baked heavily into expectations, marking nearly 11% in loss potential for the stock.

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