Nomura Pounds the Table on Square (SQ) Stock

Nomura analyst Dan Dolev was out pounding the table on shares of Square (NYSE:SQ) Tuesday, reiterating a Buy rating on the stock, while raising the price target to $86 (from $82), which implies an upside of 15% from current levels. (To watch Dolev’s track record, click here)

Dolev’s more optimistic view for the company reflects the broadening scope of Square’s business, which in recent years has included the launch of a range of successful new products and services. Dolev is particularly optimistic about Square’s expansion in consumer products with its Cash App ecosystem.

Dolev points out that his July payments app tracker shows cumulative SQ Cash App downloads surpassing Venmo for the first time (33.5M vs. 32.9M) with 2.2M Cash App downloads in July marking the highest monthly addition on record. Dolev noted, “With SQ Cash App growing 3x faster than Venmo, we expect Cash App downloads to continue to bifurcate away from Venmo […] We estimate that the Cash App could contribute $30-40mn or 2-3% of adj. net revenue in 2018. We base our estimates on several conservative assumptions of ~11mn active users, $26mn from Cash Card, $8mn of instant deposit rev. If the Cash App continues to grow rapidly, the business could reach or even exceed $100mn in sales by 2020, even without deeper active user penetration.”

Furthermore, “We have previously observed that the Cash App has decoupled from Bitcoin, as the App remained resilient in the face of slowing Coinbase downloads and declining Bitcoin prices. Interestingly, this relationship seems to go both ways. While Bitcoin prices increased in July and Coinbase downloads accelerated +11%, Cash App downloads remained stable at +154%, showing little variance from prior months’ growth rates.”

Overall, however, TipRanks points to caution when it comes to the mobile payments giant, with the Street divided on whether to be bullish or sidelined on the stock. Out of 26 analysts polled in the last 3 months, 12 rate a Buy on SQ , 13 issue a Hold, while only 1 recommends to Sell. When considering if this stock is an overvalued or undervalued contender in the market, it is worthy of note that analyst expectations indicate a slight downside, with the 12-month average price target standing at $72.45.

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