Square Inc (SQ) Draws Price Target Jump from Deutsche Bank Ahead of 4Q Showcase

Deutsche Bank's Bryan Keane sings the praises of SQ's "massive market opportunity" ahead.

As Square Inc (NYSE:SQ) gears up to deliver its fourth quarter earnings this Thursday evening, one bull is getting even more bullish on the tech player.

Deutsche Bank analyst Bryan Keane calls for fired-up revenue growth momentum experienced last year to keep soaring through all of 2018- especially thanks to rising penetration of new products, expansion of international prospects, as well as gains in bigger merchant total payment volume (TPV).

Therefore, in a confident preview, the analyst sets high expectations ahead of the print, reiterating a Buy rating on SQ stock while raising the price target from $37 to $43. (To watch Keane’s track record, click here)

Square stock carries “premium valuation for strong future growth,” cheers Keane, angling for a roughly 39% year-over-year rise to adjusted revenues circling $266.5 million for the quarter. Additionally, the analyst sets confident expectations for $0.07 in adjusted EPS, just ahead of the company’s guide. Keane spots room for even more upside on back of robust holiday sales trends.

“In addition, US reforms have lifted small business optimism and could drive expansion for SMBs as well as an improving outlook for consumer spending,” notes Keane.

For 2018, the analyst anticipates Square will “conservatively guide” adjusted revenue growth to a range of 28% to 31%, which aligns with the initial guide of 2017; adjusted EBITDA to a range of $240 to $250 million; and adjusted EPS to a range between $0.41 to $0.45.  Meanwhile, this “may set up for a continued beat and raise throughout FY18.”

Keane believes, “The company’s preliminary analysis of ASC 606 indicates no material impact to financial statements (only incremental disclosures and impact to systems/processes). Valuations have risen for SQ indicating investors willingness to pay for the high growth profile, consistent execution, and massive market opportunity.”

For 2018, the analyst is bumping up his expectations by $0.02 to $0.41 and for 2019, the analyst is taking a $0.04 upturn in his forecasts to $0.70.

For the fourth quarter, the analyst looks for a roughly 29% year-over-year climb in transaction revenues to hover around $519 million along with standout GPB growth of approximately 29% year-over-year. Keane commends “the company’s platform-based approach (Build with SQ accounted for ~20% of GPV in 3Q17),” adding it “continues to resonate with sellers and consumers driving expansion within the existing base as well as into larger sellers, internationally, and new verticals.” Lastly, Keane will keep a close eye on the “material adoption of Bitcoin trading in the Cash App which could drive user engagement and incremental revenues overtime.”

TipRanks highlights a Wall Street struck with caution when it comes to Square stock. Out of 16 analysts polled in the last 3 months, 9 are bullish on SQ stock, 6 remain sidelined, while 1 is bearish on the stock. With a loss potential of nearly 2%, the stock’s consensus target price stands at $43.43.

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